Key Takeaways
- • New first lien private credit loans are roughly half as likely as outstanding loans to carry payment-in-kind (PIK) interest: as of October 27, 2026, PIK-bearing loans made up 5.2% of U.S. and 6.7% of European new issues on a 12-month lookback, versus about 9.5% and 13.7% on the Outstanding Issues Monitor's trailing 12-month measure, according to the Kroll StepStone Private Credit Benchmarks.
- • PIK as a share of new-issue par value on the Global First Lien benchmark fell to 2.9%, the lowest since January 2017, and U.S. First Lien PIK prevalence on a 365-day lookback hit its lowest level since the series began in 2015.
- • Outstanding European first lien loans still carry significant exposure, with PIK representing about 7.2% of interest income and the share of outstanding par with PIK rising from about 10.0% to 10.8% year over year.
- • Kroll distinguishes PIK negotiated at origination, which it views as a flexible tool, from borrowers switching from cash to PIK mid-term, which it says can signal distress.
- • Kroll cautions that the recent decline should not yet be treated as evidence of a sustained trend.
Summary
New first lien private credit loans are featuring payment-in-kind (PIK) interest far less often than outstanding loans, according to the Kroll StepStone Private Credit Benchmarks. As of October 27, 2026, PIK-bearing loans accounted for 5.2% of U.S. and 6.7% of European new issues on a 12-month lookback. On the Outstanding Issues Monitor's trailing 12-month measure, the comparable figures were approximately 9.5% and 13.7%, respectively. Kroll said these differences provide context for recent media concerns about credit quality, borrower liquidity and debt servicing sustainability.
The decline is most pronounced in the new issue market. On the Global First Lien benchmark's 12-month origination lookback, PIK's share of interest income had fallen to a seven-year low, and PIK-bearing loans represented 2.9% of new-issue par value, the lowest since January 2017. On the 365-day lookback, U.S. First Lien PIK prevalence was the lowest since the series began in 2015, while European First Lien was near its series low. Shorter lookbacks show even lower prevalence: 2.9% and 1.3% of U.S. new issues on 180- and 90-day bases, versus 5.6% and 4.6% in Europe. Kroll noted that these recent readings should not yet be treated as evidence of a sustained trend. The firm suggested that the reduced PIK usage could reflect greater caution among lenders and borrowers amid geopolitical uncertainty and AI disruption fears.
Regional differences are also notable. On a 365-day origination lookback, PIK represented 2.2% of U.S. and 1.8% of European interest income, indicating that European new deals more often include PIK features but those features contribute proportionately less income. Existing portfolios tell a different story: on the trailing 12-month measure, PIK accounted for approximately 7.2% of European and 3.9% of U.S. interest income, and the share of outstanding European par with PIK rose from about 10.0% to 10.8% over the past year. In the UK, PIK appeared in 6.7% of new loans on a 12-month lookback as of October 25, representing 2.1% of par but only 0.8% of interest income. Kroll argues these gaps show why loan-count measures alone understate or misstate exposure.
Kroll also draws a distinction between PIK types. PIK toggles negotiated at origination, which let borrowers choose between cash and deferred interest, can preserve cash for reinvestment and benefit both parties, particularly for capital-intensive, earlier-stage businesses. By contrast, borrowers requesting a switch from cash to PIK mid-term may signal an anticipated inability to pay or a need to conserve cash, and Kroll states these situations are more likely to lead to distress. The Kroll StepStone benchmarks, which cover data from roughly 40% of private credit loans and more than 28,000 direct lending instruments across 18,000 deals and 13,000 borrowers with history back to 2012, are positioned as a tool for managers, lenders, borrowers and investors evaluating the market.
The decline is most pronounced in the new issue market. On the Global First Lien benchmark's 12-month origination lookback, PIK's share of interest income had fallen to a seven-year low, and PIK-bearing loans represented 2.9% of new-issue par value, the lowest since January 2017. On the 365-day lookback, U.S. First Lien PIK prevalence was the lowest since the series began in 2015, while European First Lien was near its series low. Shorter lookbacks show even lower prevalence: 2.9% and 1.3% of U.S. new issues on 180- and 90-day bases, versus 5.6% and 4.6% in Europe. Kroll noted that these recent readings should not yet be treated as evidence of a sustained trend. The firm suggested that the reduced PIK usage could reflect greater caution among lenders and borrowers amid geopolitical uncertainty and AI disruption fears.
Regional differences are also notable. On a 365-day origination lookback, PIK represented 2.2% of U.S. and 1.8% of European interest income, indicating that European new deals more often include PIK features but those features contribute proportionately less income. Existing portfolios tell a different story: on the trailing 12-month measure, PIK accounted for approximately 7.2% of European and 3.9% of U.S. interest income, and the share of outstanding European par with PIK rose from about 10.0% to 10.8% over the past year. In the UK, PIK appeared in 6.7% of new loans on a 12-month lookback as of October 25, representing 2.1% of par but only 0.8% of interest income. Kroll argues these gaps show why loan-count measures alone understate or misstate exposure.
Kroll also draws a distinction between PIK types. PIK toggles negotiated at origination, which let borrowers choose between cash and deferred interest, can preserve cash for reinvestment and benefit both parties, particularly for capital-intensive, earlier-stage businesses. By contrast, borrowers requesting a switch from cash to PIK mid-term may signal an anticipated inability to pay or a need to conserve cash, and Kroll states these situations are more likely to lead to distress. The Kroll StepStone benchmarks, which cover data from roughly 40% of private credit loans and more than 28,000 direct lending instruments across 18,000 deals and 13,000 borrowers with history back to 2012, are positioned as a tool for managers, lenders, borrowers and investors evaluating the market.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.