WSJ | Private Credit Firms Clamp Down on Loan Sweeteners in Fear of “Shadow Defaults”
Originally published by The Wall Street Journal on August 11, 2026.
Total interest income for private credit firms has steadily included a greater share of payment in kind (PIK) since 2021, reaching 11% of outstanding private credit loans in Q2 2026. However, lending standards have tightened in 2026, and private credit lenders are experiencing increased negotiating power when negotiating deals. As a result, many private credit lenders are responding to fears of a rising shadow default rate by clamping down on PIK options and other loan sweeteners.
Brian Garfield, Lincoln International Managing Director & Global Head of Portfolio Valuations, shared his insights with the Wall Street Journal.
“This is an evolution we are seeing unfolding now,” said Brian. “The pendulum is shifting.”
Summary
- Lincoln International’s data and expert insights shed light on recent private credit trends regarding PIK and loan sweeteners.
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