Where’s My MOIC: Debt To Equity To Excellence

Private credit defaults are accelerating, and credit funds are increasingly finding themselves as unplanned owners of businesses they never intended to run. The funds that capture the highest MOIC will not be the ones who got lucky. They will be the ones who already had an ownership playbook. This article outlines the three-phase value creation framework that separates a 1.2x outcome from a 1.6x, and the questions every credit fund should be asking before their next borrower misses a payment.

Most credit funds have a detailed playbook for what happens when a borrower misses a payment. Almost none have one for what happens when they end up owning the business. In 2025, U.S. private credit defaults hit a record 9.2%, up from 8.1% the year prior.¹ The pain was concentrated in small and middle-market companies: Borrowers with EBITDA under $25 million defaulted at nearly 16%, compared to just 4% for issuers with EBITDA above $100 million.¹