Debt Service Coverage in Private Markets Is Improving, Actually | Nicholas Brooks
July 26, 2026
AI Summary
5 min readIn 2024, the interest coverage ratio for private companies in the US—a key measure of how easily a company can pay its debt—actually started to rise again. This runs directly against the stream of alarming headlines about a looming private credit crisis. Nicholas Brooks, Head of Economic and Investment Research at ICG, which manages over $126 billion, argues that the data on the companies he tracks does not support the systemic fear narrative. Instead, he points to a corporate sector that has proven resilient, with the real financial risk sitting elsewhere: on government balance sheets.
The Mechanics of Debt Service and the Data That Counters the Panic
The central metric in the conversation is the interest coverage ratio (ICR), which compares a company’s earnings before interest and taxes (EBIT) to its interest expense. An ICR below 1 is a red flag; between 1 and 2 is a decent place; above 2 is comfortable. Brooks tracks this data across a proprietary database of 400 to 500 private companies in the US and Europe.
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What you'll learn
- 1 (00:00) **Introduction: The Private Credit Debate** - Jack Farley sets up a contrarian perspective against the common narrative that private credit will cause the next financial crisis.
- 2 (00:58) **Looking Through the Noise to Fundamentals** - Brooks explains why markets have remained resilient despite geopolitical shocks and high interest rates.
- 3 (03:30) **The Surprising European EBITDA Outperformance** - Brooks explains why European private companies have grown EBITDA faster than US ones, counter to the prevailing narrative.
- 4 (07:43) **Defining the Interest Coverage Ratio** - Brooks explains what the metric means and why it's a critical tool for assessing debt risk.
- 5 (08:54) **The Post-COVID Squeeze and Recent Recovery** - Brooks traces the dramatic fall and then stabilization and recovery of interest coverage ratios in private markets.
- 6 (11:14) **The Systemic Risk Assessment** - Brooks argues that the data does not support fears of a systemic private credit crisis.
- 7 (14:40) **The Dispersion is Micro, Not Macro** - Brooks explains that performance differentiation is driven by company-specific management and financial structure, not sector-wide trends.
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Show Notes
In this episode of Monetary Matters, host Jack sits down with Nicholas Brooks, Head of Economic and Investment Research at ICG, to discuss the true health of private credit and corporate balance sheets. Brooks argues that underlying corporate fundamentals and EBITDA growth remain highly resilient against macroeconomic and geopolitical noise. He notes that corporate interest coverage ratios are stabilizing in Europe and actually improving in the United States, pointing away from any imminent, systemic private sector risks. Instead, Brooks warns that the most significant medium-term threat to the global economy stems from soaring government debt and unchecked fiscal deficits, which could spark future market volatility and further weaken the U.S. dollar. The conversation also explores how massive capital expenditures in artificial intelligence infrastructure are currently acting as a protective buffer for the broader economy, even as the ultimate, long-term impacts on worker productivity remain uncertain. Finally, Jack provides his own post-interview analysis, highlighting the immense influence of the Federal Reserve's interest rate decisions on corporate debt metrics and exploring the reflexive nature of capital inflows within private markets. Recorded July 13, 2026.
Nicholas Brooks on LinkedIn https://www.linkedin.com/in/nicholas-brooks-4738a927/
Jack Farley on X https://x.com/JackFarley96
Nicholas Brooks works:
“Recent US Credit Market Dislocation: Systemic or Idiosyncratic?”:
https://www.icgam.com/2025/10/24/recent-us-credit-market-dislocation-systemic-or-idiosyncratic/
“Middle East Update: Implications of the war for the global economy and markets”:
BIS paper on Debt Levels (“BIS Working Papers No 1235 Aggregate debt servicing and
the limit on private credit”):
https://www.bis.org/publ/work1235.pdf
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