A default isn't the loss. What comes back is.

In private credit, a default isn't the loss. What comes back decides it. It's default, and recovery. A missed payment is a default. So is breaking a promise in the loan, like a debt limit. Say a lender is owed ten million, and the borrower defaults. The business is sold, and repays six million. Recovery: sixty percent. The loss: four million. Where a loan ranks, and what backs it, decide how much comes back. Senior, secured loans usually recover more. So why do investors care? Losses depend on how often borrowers default, and how much comes back. Count the defaults. Then count what came back.