Octus Identifies 27 Private Credit Borrowers Shifting Portion of Interest to PIK in Q4’25; High Concentration in Residential Roofing Repair Cos.

Credit Research: Mark Fischer Relevant Items: Octus’ BDC Database Link to Excel Download of 27 Borrowers Switching to PIK Interest Octus has identified 27 borrowers that switched a portion or all of the interest paid to lenders to PIK in the fourth quarter ended Dec. 31, 2025, after paying all-cash interest in the third quarter ended Sept. 30. Most companies that switched interest to PIK also saw a reduction in fair value as a percentage of par, although the average reduction in fair-value price was minimal. The full list of 27 loans, including sponsors, lenders and fair-value pricing, is shown below and can be downloaded HERE: Borrowers paying interest in kind could be an early indication of stress, as discussed in our private credit restructuring webinar. It is unclear if in any of these cases borrowers had the contractual right to pay all or part of their interest in kind or if the switch to PIK interest was a result of an amendment to the original credit agreement. Either way, the switch to at least partial PIK is likely as a result of stress. Move to PIK Early Indicator of Stress As shown below, maturities of loans switched to at[...]