Private Credit Eyes LBO Rebound Amid Transparency Demands
- Editor
- Jan 2
- 2 min read
What's New
PitchBook LCD's 2026 US Credit Markets Outlook forecasts private credit will finally see the increased buyout and M&A activity the market has been seeking, though BofA Global Research expects overall loan issuance to decline approximately 15% year-over-year to $120 billion. The report signals a critical inflection point as interest rate cuts inspire dealmaking while simultaneously intensifying scrutiny on borrower creditworthiness and demands for greater market transparency.
Why It Matters
After years where refinancings, add-ons, and dividend recaps dominated deal flow, private credit lenders are positioned to return to their preferred business: new-money LBO financing with premium yields. However, the sector faces a credibility test as negative headlines around companies like First Brands and Tricolor—combined with the Blue Owl redemption saga—have heightened concerns about private credit's opacity precisely as asset managers court retail investors.
Big Picture Drivers
Rate relief: Interest rate cuts are inspiring dealmaking and providing relief to PE firms struggling to exit investments and return capital to LPs
Tariff clarity: Greater visibility on macroeconomic policies that paralyzed markets in Q2 has restored sponsor confidence
Exit pressure: Median PE hold times have climbed to 3.8 years—the highest since 2011—creating pent-up demand for transactions
Maturity progress: Near-term maturities have been substantially addressed, with just 15% of BDC debt due in 2026-2027 versus 27% a year earlier
Dry powder overhang: Ample capital awaiting deployment has compressed spreads to multiyear lows, challenging lender economics
By The Numbers
$120B: BofA's projected 2026 private credit loan issuance (down 15% YoY)
44%: Share of 2025 volume supporting LBOs, versus 61% in 2021
3.8 years: Median PE-owned company hold time, highest since 2011
42.5%: H1 2025 private debt capital captured by mega-funds ($5B+)
$68.1B: Current BDC debt maturing in 2026-2027, down from $75.7B at year-end 2024
Key Trends to Watch
Transparency demands: Expect louder calls for disclosure on borrower earnings and PIK interest usage, with data providers stepping up to fill information gaps.
Mega-fund dominance: Funds exceeding $1 billion captured 89% of H1 2025 capital raised, signaling continued consolidation pressure on smaller managers.
Retail caution: The Blue Owl redemption halt has prompted asset managers to seek ways to safeguard private credit's reputation as retail expansion continues.
Spread normalization: With deal supply expected to increase, spreads will likely stabilize or widen from current multiyear lows.
The Wrap
Private credit enters 2026 at a crossroads: the long-awaited LBO revival appears imminent, but the sector must simultaneously address intensifying transparency demands and reputation concerns that could shape its ability to attract retail capital at scale. Winners will be managers who can demonstrate rigorous underwriting while navigating the industry's transition from opportunistic growth phase to mature asset class accountability.
Read Full Report: PitchBook LCD 2026 US Credit Markets Outlook