Getting ahead of the curve – identifying stress before it arrives

We focus on three leading indicators that tend to flash warning signs well ahead of a credit cycle turn: amended PIK or “bad PIK” usage, loans marked below 80 cents on the dollar, and interest coverage ratios below 1x. Today, each of these metrics has either improved or held steady relative to recent quarters — pointing to a stable environment rather than one of stress. Combine that with a still-supportive macro backdrop, middle market borrowers appear well-positioned to navigate the current environment.