The US leveraged loan market is poised for a year of moderate expansion in 2026 as market analysts project a transition from heavy opportunistic activity toward net new-money deals driven by escalating event-driven financing. A sampling of bank forecasts anticipates supportive fundamentals, a rebound in sponsor-driven transactions, and continued refinancing needs as key themes shaping the year ahead.
- LBO and M&A dealmaking is expected to increase in 2026 on stable fundamentals and lower borrowing costs.
- Refinancing activity will continue to dominate, supported by a stable rate backdrop and a large 2028 maturity wall.
- Dividend recapitalizations will moderate as acquisition volume grows and sponsors shift their focus to exits.
As 2025 winds down, total volume for the broadly syndicated leveraged loan market stands at $439 billion (excluding repricings) as of Dec. 10, short of the $502 billion logged in 2024. An anticipated rekindling of LBO and M&A activity failed to materialize this year, and instead borrowers flooded the market to refinance or reprice loans and fund dividends. Repricing volume dropped to $496 billion from $757 billion in 2024, but that is still the second-highest annual total on record.
The $142 billion of LBO/M&A volume is 32% of the total (excluding repricings), both three-year highs but below volume and share levels from 2015-2022.
Meanwhile, the $273 billion of refinancings and dividend recapitalizations is the second-highest total over the past 12 years, behind only the $342 billion in 2024. Refinancings alone totaled $193 billion, also the second-highest since 2013 behind 2024. This activity hacked away at the near-term maturity wall. According to LCD, leveraged loan maturities in 2026 and 2027 have declined to $59 billion as of Dec. 5, compared to $195 billion at the end of 2024. Maturities expand sharply in 2028, to $301 billion. Taken together, the amount of loan maturities over the next three years is $360 billion.
Spreads heading into year-end continued to hover at or near historic lows, including for B-minus-rated issuers at 354 bps for the quarter to Dec. 10, down from 397 bps in the fourth quarter of 2024.
Volume expectations
Looking ahead to 2026, Barclays projects institutional loan supply (excluding repricings) of $480-520 billion, up around 5% from the bank’s 2025 estimate. Refinancing will remain the main driver, totaling $220-240 billion, the bank says, accounting for 46% of total issuance, well above historical averages. “The maturity wall for the next three years is at its highest since 2011, prompting issuers to address near-term maturities while technicals remain strong,” Barclays stated in an Oct. 31 research report. Additional pockets of refinancing will come from loan-for-bond deals and continued takeouts of private credit loans.
That said, Barclays forecasts both M&A financing ($100-120 billion) and LBO issuance ($70-90 billion) to increase from 2025, supported by a growing acquisition pipeline, including some large transactions already announced (Electronic Arts, Hologic). LBO issuance will be comfortably above the $55 billion average in 2022-2024 but will remain below peaks reached during “very low rate periods.”
Barclays notes that extended sponsor hold times and stable fundamentals have elevated dividend recap issuance and will support further issuance in 2026, but expects “some thawing in the backdrop for exits.” Dividend recaps should decline to $60-70 billion, though remain above pre-Covid norms.
For reference, PE-backed companies issued $70.2 billion in leveraged loans for dividend recapitalizations through Dec. 8, according to LCD, a total that already exceeded that of every full year except 2021 ($73.2 billion). Not all of the money raised from those transactions goes to the private equity owners, however, as most also refinance existing debt. Actual sponsor dividends through Dec. 8 totaled $43.6 billion, the highest annual total since the Global Financial Crisis.
JPMorgan anticipates gross issuance of $875 billion, down 10% from 2025, and net new issuance of $300 billion (excluding refinancings and repricings), which would mark a 55% increase. Refinancing will remain elevated at $325 billion, up 10% and supported by maturities ballooning in 2028, while repricing activity will fall sharply from 2025, by 45%, to $250 billion, although that is elevated by historical context. The forecast for LBO/M&A financing of $225 billion is nearly double the output in 2025. Among the factors supporting the uptick in issuance are “solid credit fundamentals, a more stable interest-rate backdrop, deregulation tailwinds, and improved access to capital.” On top of that, dividend recaps will continue to play a role with $50 billion forecasted for next year, while issuance for general corporate purposes will be a record $25 billion, JPMorgan says, driven in part by AI and data-center buildout.
Morgan Stanley expects leveraged loan issuance to grow by a modest 3% to $490 billion. In its forecast, refinancing activity dips slightly to $210 billion, while new-money deals — including LBO, M&A, and GCP — rise to $280 billion, with LBO/M&A up 33%, to $210 billion. “Next year, we expect sponsor-backed acquisitions to rebound as favorable macro and financing conditions are good signs for Alts to put money to work,” Morgan Stanley stated in a research report. By contrast, dividend recap volume is expected to moderate as acquisition activity picks up. Analysts also flagged AI infrastructure as a potential source of incremental supply in 2026. For recaps and GCP combined, volume will retract 30%, to $70 billion, in 2026.
A “long-awaited rebound” in LBO/M&A will be countered by lowered refinancing levels, according to strategists at BofA Securities, who see a roughly 5% decline in overall volume next year to $425 billion, excluding repricings. Refinancing will be a drag on total issuance as the bank sees a 20% decline year-over-year to $160 billion, with an eye toward the outer edge of the three-year maturity wall. As for “true new money,” BofA expects strategic corporate activity to play a dominant role with $100 billion of issuance, a 20% year-over-year gain, while LBO volume will rise 10%, to $70 billion, catching a “tailwind due to rates, and public-to-private conversion trends.” Meanwhile, dividend recap growth will rise 5%, to $80 billion.
More broadly, PE firms spent much of 2025 navigating what was a difficult environment for exits. According to PitchBook LCD’s recently completed US Private Equity Survey, portfolio company exits will remain a key priority within the PE ecosystem over the next six months. With many PE-owned assets held for extended periods, half of the respondents to the survey identified exiting portfolio companies as the primary area of focus. Another 22% expect a more balanced approach, while just 8% anticipate holding off until market conditions become clearer.
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