Through the first six months of 2026, 372 larger U.S. companies filed for bankruptcy protection, the highest first-half total since 2010, S&P Global Market Intelligence reported.
Yet the bond market barely flinched, and a growing pool of private capital moved toward the wreckage with open checkbooks rather than clenched fists.
Distressed-debt investors are treating the filings as a buying opportunity. The disconnect between bankruptcy volume and market calm suggests where credit conditions are heading.
Credit spreads tighten even as bankruptcy filings climb
The spread on the five-year CDX (Credit Default Swap Index) North American High Yield index, a key measure of how much extra yield investors demand to hold riskier corporate debt, fell to about 304 basis points by the end of June, S&P Global noted.
That was a sharp retreat from the 406-basis-point level reached in March, when the Iran conflict and concerns about AI disruption to software companies briefly unsettled markets, Neuberger Berman and Guggenheim Investments noted in separate outlook reports.
In practical terms, a tightening spread means bond investors grew more comfortable lending money to lower-rated companies over the second quarter, even as distressed firms continued entering court protection.
Andrew Glenn, managing partner at Glenn Agre Bergman & Fuentes, expects shrinking liquidity in private credit to drive a wave of court-supervised restructurings.
Once there are withdrawals from private credit funds and market liquidity dries up, you’re going to see more in-court restructuring activity…What you are going to see as time goes on is less liquidity, more demand for financial and operational restructurings and more in-court activity as a result
The ICE BofA US High Yield Index option-adjusted spread was near 269 basis points as of mid-July, well below its 20-year average of about 490 basis points, according to Federal Reserve Economic Data.
Credit spread behavior has real downstream effects on borrowing costs for auto loans, credit cards, and mortgages, since corporate bond pricing shapes the broader lending environment in which banks operate.
Industrial and healthcare companies drive the filing surge
Industrial companies accounted for the largest share of filings through June, with 50 petitions, followed by 35 from consumer discretionary and 26 from healthcare, according to S&P Global data.
In June alone, industrials and healthcare each filed at least seven petitions, while the financial sector contributed five.
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Small businesses faced even steeper pressure, with 1,663 smaller firms filing for protection during the first half of 2026, a 50% year-over-year jump, bankruptcy services platform Epiq AACER confirmed.
Amy Quackenboss, executive director of the American Bankruptcy Institute, attributed the surge to higher borrowing costs, increasing expenses, and geopolitical volatility, which she said are leading more debtors to seek restructuring.
Distressed-debt funds amass $100 billion to buy troubled assets
Opportunistic, special situations, and distressed-debt funds have collectively amassed more than $100 billion in new capital over the past two years, with the ten largest funds currently raising nearly $50 billion more, according to WithIntelligence.
That capital is positioned to purchase distressed corporate loans and bonds at steep discounts, often in the range of 60 to 80 cents on the dollar, according to Brian Peters’s industry analyses of recent distressed transactions.
Victor Khosla, founder of Strategic Value Partners, told the Financial Times that the current environment represents the largest opportunity for distressed-debt investing since the 2008 financial crisis.
Payment-in-kind structures may be masking deeper borrower problems
The gap between headline bankruptcy counts and investor appetite may not be as reassuring as it appears.
As of the fourth quarter of 2025, about 6.4% of private credit loans carried so-called bad payment-in-kind provisions, under which lenders accepted deferred interest rather than cash because borrowers could not meet their obligations.
The figures come from Lincoln International data and have more than doubled since 2021, as Lincoln International treats them as a shadow default indicator.
This suggests that real distress in private credit portfolios may run closer to 6%, roughly three times the publicly reported default rate of about 2%.
Restructuring attorneys expect a second-half wave of large filings
Glenn described the environment in a May interview with S&P Global as a “calm before the storm” ahead of a larger restructuring cycle.
Glenn told S&P Global that macroeconomic factors, including elevated interest rates weighing on highly leveraged companies, have not yet led to the next round of major Chapter 11 cases, but he projected significantly more court-supervised restructurings in the second half of the year.
PwC’s 2026 global private credit survey, which polled more than 120 portfolio managers, reached a similar conclusion.
PwC described the asset class as entering its first “test” as a major asset class, noting that while most managers remain positive about growth, 64% cite borrower defaults and credit losses as an expected drag on 2026 fund performance.
For now, rising bankruptcies and tight credit spreads continue to coexist. Whether that changes depends on how much of the $100 billion in distressed capital gets deployed in the second half of 2026, and how many of the borrowers PwC’s surveyed managers flagged actually default.
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