Tech borrowers account for 39% of $139.8 billion in distressed US leveraged loans
JPMorgan counts $65 billion of US leveraged loans trading below 60 cents on the dollar, up from $40 billion a year ago and the most since March 2020. Lenders to tech and software borrowers are taking the losses through prices and debt swaps while recorded defaults stay low.
The Investor · Invest desk
What happened
- The wider pool of loans at or below 80 cents nearly doubled in a year and now sits about $4 billion under its May 2020 peak.
- Software borrowers face more than $100 billion of maturing debt while investors worry that AI tools will undercut their businesses.
- Yields on CCC-rated high-yield bonds have reached 15.58%, the highest since November 2022, with spreads above 1,000 basis points.
- This year the share of high-yield bonds hit by defaults has run ahead of the share of loans, a reversal last seen in 2020, according to JPMorgan strategists.
Why it matters
- Who has to decide decision An allocator who cuts tech-heavy loan funds trims the largest single sector but still holds most of the distress, because $85.4 billion of the pool is owed by borrowers outside technology.
- Who's exposed exposure Newly distressed issuers are larger on average, so a loan fund with a few big software positions can see its marks fall further than its sector weight implies.
- What it costs cost Funds weighted to the bottom rating tier are already paying, since CCC-rated loans have lost 1.97% this year while every higher-rated loan category made money.
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Take technology out of the distressed pool and $85.4 billion, or 61% of it, is still there, owed by borrowers in other sectors [18]. Tech's 39% is the largest share, and no other sector comes close in the JPMorgan data [6][7]. Software is one part of the tech figure. Its own distressed volume hit a record $25 billion to $40 billion during the AI-related selloffs, according to Crypto Briefing's account of the report [26].
The concentration is clearer by borrower, or rather by the size of the borrowers now falling below 80 cents. About 141 issuers have loans under that line, against roughly 106 a year ago, a rise of a third [10][24]. Distressed dollar volume rose nearly 90% over the same year [4]. On those figures the average distressed issuer is about 40% larger than last year's, with roughly $990 million of loans below 80 cents [20][19]. Software providers CDK Global, Qlik Technologies and Quest Software are among the biggest contributors, according to Bloomberg, as reported by Quartz [11].
A loan bought at 60 cents returns about 67% if the borrower repays at par [25]. Nearly half the distressed pool, $65 billion of $139.8 billion, trades below that price [21]. Payment defaults have not yet tested the market's doubt. The trailing 12-month payment default rate on the loan index was 0.93% in July [12]. Part of the gap, according to Crypto Briefing, comes from liability management exercises and distressed exchanges [14]. In these, borrowers push out maturities or swap loans for new ones on terms worse for lenders, and avoid a formal default (the borrower keeps paying, just on different paper) [14]. A lender can take a loss in one of those swaps that never appears in the payment default rate [14].
Defaults could rise to meet the prices. JPMorgan projects leveraged loan defaults at 4.50% next year, up from 2.25% in 2026 and well above its 2.75% projection for high-yield bonds [9]. The 4.50% is about 4.8 times the July payment default reading, though it may be a different measure [22]. Exchanges could instead keep the default rate low while lenders absorb losses through worse terms [14]. Or software borrowers could refinance what comes due, and their loans could climb back toward the near-par prices stronger borrowers already get [13].
I think holders of tech-heavy loan books take most of their losses along the second path, and the default statistics record those losses late, if at all [14]. JPMorgan's own projection argues for the first path, and the two can run together [9]. This view is wrong if software loans recover toward par while payment defaults stay under 1% [12][13]. In that case the 60-cent marks were a price that misjudged the value, and buyers of the paper collected the 67% [25].
The sources do not break out how much of the $54.4 billion sits in CLOs or loan funds. Quartz adds that loans originated before 2024 largely did not account for AI as a meaningful business risk [27]. If that holds, the year a fund's software loans were written tells an allocator more than the fund's sector label.
What to watch
- Whether the 80-cent distressed pool tops roughly $143.8 billion, its May 2020 peak.
- Whether the trailing payment default rate moves off 0.93% toward JPMorgan's 2.25% projection for 2026.
- How CDK Global, Qlik Technologies and Quest Software handle their debt: refinancing, an exchange on worse terms for lenders, or default.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence60
- Adoption
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- Hype gap+10
- Incentives
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- Confidence62
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
According to a JPMorgan report dated October 6, 2026, deeply distressed US leveraged loans, those trading below 60 cents on the dollar, total $65 billion, up from $40 billion a year earlier.
- [2]
The $65 billion of loans trading below 60 cents is a level the market has not seen since March 2020.
- [3]
Loans trading at or below 80 cents on the dollar, the broader distressed category, reached $139.8 billion.
- [4]
The $139.8 billion broader distressed figure is a nearly 90% jump year over year.
- [5]
The $139.8 billion distressed pool is nearly double its level twelve months earlier and only $4 billion beneath the peak recorded in May 2020.
- [6]
Technology accounts for 39% of distressed loan volume, equivalent to $54.4 billion, more than any other sector, according to JPMorgan strategists including Nelson Jantzen.
- [7]
No other sector comes close to technology's share of the distressed loan pool in the JPMorgan data.
- [8]
Software companies face a refinancing challenge as more than $100 billion of maturing debt comes due, with concerns mounting that advances in AI could disrupt software businesses.
- [9]
JPMorgan projects high-yield bond and leveraged loan default rates to rise next year from a projected 2.25% in 2026 to 2.75% and 4.50% respectively.
- [10]
The count of leveraged loan issuers whose debt has fallen below 80 cents has reached approximately 141, 35 higher than a year ago.
- [11]
Software providers CDK Global, QLIK Technologies Inc. and Quest Software are among the biggest contributors to distressed loan volume.
- [12]
The trailing 12-month payment default rate for the leveraged loan index has stayed below 1% in recent months, with a reading of 0.93% in July 2026.
- [13]
Stronger borrowers continue to see their loans trade near par, while weaker credits, especially in tech, are absorbing nearly all the selling pressure.
- [14]
The market has seen an ongoing shift toward liability management exercises and distressed exchanges, which let struggling borrowers rework debt by pushing out maturities or swapping loans for new ones on terms less favorable to lenders, and which help companies avoid formally defaulting.
- [15]
CCC-rated leveraged loans have lost 1.97% so far this year, in contrast to positive returns across all higher-rated categories.
- [16]
Spreads on CCC-rated high-yield bonds have climbed above 1,000 basis points, the highest since the 2023 regional banking crisis, and yields have reached 15.58%, the highest since November 2022.
- [17]
The share of high-yield bonds touched by defaults has exceeded the comparable figure for loans so far this year, a reversal that has not occurred since 2020.
- [18]
Distressed loans outside technology total about $85.4 billion, roughly 61% of the $139.8 billion pool.
- [19]
The average distressed issuer carries roughly $990 million of loans at or below 80 cents.
- [20]
The average distressed issuer is about 40% larger by distressed volume than a year ago (approximate, since growth is given as nearly 90%).
- [21]
Loans below 60 cents are about 46% of the distressed pool at or below 80 cents.
- [22]
JPMorgan's 4.50% projected loan default rate for next year is about 4.8 times the 0.93% July payment default reading.
- [23]
The May 2020 peak of the broader distressed pool was roughly $143.8 billion.
- [24]
About 106 issuers had loans below 80 cents a year ago, so the count has risen by about a third.
- [25]
A loan bought at 60 cents returns about 67% if repaid at par.
- [26]
Distressed volume within the software sector alone surged to record levels, peaking at $25-40 billion during AI-related selloffs.
- [27]
Loans originated before 2024 largely did not account for AI as a meaningful business risk.
Sources
2 independent publishers whose own reporting we read for this story.
- cryptobriefing.comLeveraged loan distress hits its highest level since the pandemic
1 article · October 6, 2026
- qz.comDistressed U.S. leveraged loans hit pandemic-era high, with tech leading the way
1 article · October 6, 2026
Topics and entities
Topics
- Liability management exercises
- Private Credit
- AI disruption of software businesses