The fourth quarter of 2025 brought an improved haul of M&A dealmaking to originators’ desks, which was notable after a disappointing first half of the year. The acceleration in activity brightened moods as concerns about tariffs receded further.
Larger deals have once again stolen the spotlight. The record-breaking $55 billion LBO for Electronic Arts (EA), announced in Q4, stoked debate on just how big a loan the private credit market could muster. The EA buyout is backed by a $20 billion debt financing commitment from JPMorgan, of which $18 billion is expected to be funded at close.
Generally speaking, private credit lenders say that a $20 billion private credit loan is still not feasible. The next milestone is likely $10-12 billion, which several market participants say is within reach, although not imminent. The fourth quarter brought plenty of large deals, though each remained comfortably in the single digits.
All told, those large deals — combined with a bout of volatility in the broadly syndicated loan market — helped boost direct lending volumes in Q4. Across all deal categories, LCD tracked $69.8 billion across 201 deals in the three months to Nov. 30, the latest data available. That’s the highest volume since Q2 2024 ($85.2 billion), but the lowest transaction count since Q4 2023.
New issues were not the only market focus, however.
Following the bankruptcies of subprime auto lender Tricolor and auto parts maker First Brands in September, Q4 kicked off with JPMorgan CEO Jamie Dimon’s much-referenced comments about cockroaches, suggesting more potential debt problems to come. So far, other significant issues have yet to materialize. Technically, neither bankruptcy casualty was a traditional private debt issuer. Still, private credit lenders went on the defensive.
One reason was likely that the negative attention came at an awkward time for lenders, who are actively trying to market private credit as a sensible part of a diversified investment portfolio for retail investors.
Attention on the potential building of systemic credit risk hasn’t helped either. Researchers at the IMF said in an Oct. 14 report that the growing exposure to non-bank financial institutions (NBFIs) is increasing concentration risk among some banks in the US and Europe. In October, Moody’s Ratings added to the risk discourse, saying US banks have lent roughly $300 billion to private credit providers, alongside another $285 billion to private equity funds and $340 billion in unused commitments to each of these. The IMF also highlighted risks to insurers, which have ramped up their allocation to private credit funds. In a 2026 outlook published on Dec. 16, entitled “2026 Private Credit Outlook Negative: Margin Compression and Rising Leverage Are Key Challenges,” Morningstar DBRS said private credit borrowers will face a downtrend in credit quality, and that an elevated pace of downgrades will continue in 2026.
Similar ideas circulated among respondents to the PitchBook LCD quarterly private credit market survey. The survey showed that concerns over private credit shifted in Q4, with credit stress and loosening borrowing conditions becoming the leading sources of anxiety among market participants.
In response to a question on headwinds facing the market, “Stress/default risk” was the leading choice, with 30% of respondents. A close second option was “Loosening credit conditions.” The two responses related to credit quality overtook what had been the leading choice for multiple quarters, “Sourcing assets.” LCD’s fourth-quarter survey was conducted between Dec. 4-15. Respondents included a mix of credit providers, banks, PE shops, advisory firms and other market participants from the US and Europe.
Another market focus in Q4 2025 has been the regulatory advantages that have fueled the explosive growth of the private credit market. In December, two federal agencies announced they had rescinded existing interagency guidelines on leveraged loans, key steps in easing the stricter bank lending standards that helped supercharge the growth of private credit. The Federal Reserve, a party to the guidelines established more than a decade ago, has not indicated whether it will similarly rescind the guidance. The agencies called the existing rules “overly restrictive,” citing in their rationale how regulated banks have lost market share in the leveraged loan market to their non-bank peers.
These credit headlines, combined with interest rate cuts, did not help the share prices of many lenders’ publicly traded investment vehicles. BDC stock prices have fallen meaningfully this year while the broader stock market has rallied.
The low BDC valuations took a toll on a planned merger of two Blue Owl BDCs, which the lender terminated in November after reports surfaced that consummating the merger would leave investors in one of the funds — a non-traded vehicle Blue Owl has used to raise capital from retail investors since 2017 — with losses as high as 20%. The expected losses stemmed from the exchange formula used to facilitate the planned stock-for-stock merger, which was designed to avoid diluting investors in Blue Owl’s publicly traded flagship fund even as that fund traded well below its stated NAV per share. In early 2026, the non-traded retail fund will resume allowing redemptions at NAV, which the lender had paused in anticipation of the merger. Blue Owl has indicated it will consider revisiting the merger sometime in the future.
A jumbo quarter
Against this backdrop, private credit issuance continued to grow.
By November, LBO volume had climbed to its strongest point since Q2 2022. Direct lenders issued an estimated $23.7 billion of loans to finance buyouts in the three months to Nov. 30, up from an average of around $20 billion in the first three quarters of the year, according to LCD’s most recent Private Credit Monitor.
Many of the quarter’s largest deals reflected issuers that migrated from the broadly syndicated loan market.
Private credit lenders committed $3.1 billion in financing to support Bain Capital’s planned buyout of the commercial HVAC repairer Service Logic. Blackstone led the transaction through its Blackstone Credit & Insurance unit, with Apollo, Antares Capital, HPS, KKR and Oak Hill Advisors participating, sources say. Pricing was discussed at S+450, with a 25-bps step-down tied to leverage. Closing leverage was roughly 7x. Service Logic is currently a portfolio company of Leonard Green & Partners, and its TLB is a component of the Morningstar LSTA US Leveraged Loan Index.
In another jumbo deal, the construction engineering company Pike Corporation received roughly $3 billion in debt from private credit lenders to support TPG’s acquisition of the company. Ares is leading the financing, which includes a unitranche loan and DDTL. Blackstone, Blue Owl, HPS, KKR and Oak Hill Advisors are also in the lender club. TPG, alongside minority investor La Caisse, is acquiring the company from Lindsay Goldberg for more than $5 billion. Pike Corp. has EBITDA of about $450 million, sources say. Its existing debt includes a $730 million term loan from the BSL market issued in 2021.
Also, the photography company Shutterfly, backed by sponsor Apollo, obtained a roughly $2 billion private credit loan to refinance some of its existing public debt. General Atlantic led the facility, according to market sources. Pricing is S+650, and the deal was marketed with company EBITDA of about $430 million, senior leverage of 4.7x and total leverage of 5.8x.
Mitratech marked another takeout. The business compliance software provider, a portfolio company of the Ontario Teachers’ Pension Plan, received more than $2 billion from private credit lenders to refinance BSL debt. Blackstone led the unitranche financing, which was priced at S+475 and includes a portability feature. Three tranches of Mitratech’s existing debt are constituents of the Morningstar LSTA US Leveraged Loan Index.
Another win for private credit emerged from what was supposed to be a BSL refinancing. Sources said defense contracting firm ManTech International, backed by Carlyle, moved to private credit for a proposed $2.3 billion refinancing that was initially launched via BSL markets. The company had brought a $2.15 billion term loan B and $150 million delayed-draw term loan to the BSL market on Nov. 10, with price talk at S+300. That BSL process was pulled after the deal failed to close by the commitment deadline of Nov. 20. Incumbent lenders to ManTech include Blackstone, Blue Owl, OHA, Crescent Capital and Morgan Stanley.
Evidence emerged in Q4 that private credit lenders had taken down roughly $2 billion of second-lien loans that banks committed for the LBO of medical technology company Hologic by Blackstone and TPG Capital. PSP Investments, Oaktree, Franklin Templeton, Palmer Square, Oak Hill Advisors and Blackstone Credit are among the private credit lenders participating in the financing. The debt is priced at S+500, with an OID of 99. Banks had committed to provide more than $12 billion to back the Hologic LBO in October.
Casino and entertainment operator Bally’s Corporation (NYSE: BALY) upsized its financing commitments from private credit lenders to $1.1 billion, with proceeds earmarked to refinance BSL debt and for general corporate purposes. Ares Management credit funds, King Street Capital Management and TPG Credit provided the commitments, with the deal expected to close in Q1. In September, Bally’s extended the maturity of a portion of its bank revolver, and had explored extending the maturity of its cov-lite TLB.
Food exporter Quirch Foods — another BSL issuer — received debt to support a $1.1 billion refinancing. Ares direct lending funds and Regions Bank led the financing. A consortium of additional lenders also participated. The transaction expands the company’s ABL facility and provides access to a DDTL, which can be used to fund future acquisitions. Quirch’s first-lien term loan has been a constituent of the Morningstar LSTA US Leveraged Loan Index.
Clinical research technology company Signant Health received more than $1 billion of loans to support the company’s refinancing of its broadly syndicated debt. Blackstone Credit & Insurance led the private refinancing, which was priced at S+475. Signant is backed by Genstar Capital.
And vaccine maker Moderna (Nasdaq: MRNA) obtained a $1.5 billion credit facility to bolster its balance sheet ahead of a significant planned investment in its oncology and rare disease programs. Ares Management Credit Funds provided the financing, which was priced at S+550, with no amortization before the loan matures in five years.
Spotlight on secondaries
The private secondaries market experienced a growth spurt in 2025, with a flurry of large continuation vehicle deals that likely eclipsed in size the cumulative transaction volume for credit secondaries deals in the prior five years, according to data from Evercore.
Credit secondaries is not the secondary trading of private credit loans. It refers to the market for continuation vehicles involving private credit assets (known as ‘GP-leds’) and the trading of LP stakes, when a fund investor sells their stake in a private credit fund to another buyer (these deals are ‘LP-leds). Both types of credit secondaries transactions are about providing liquidity to existing investors, and the secondaries space has grown considerably alongside the primary private credit market as its liquidity needs increased with its size. Private credit loans themselves are traditionally buy-and-hold investments. Both secondaries and secondary private credit loan trading are meant to offset the illiquidity of the alternative asset investment.
The growth trend continued in Q4. LCD reported on multiple transactions with assets totaling several billion dollars during the quarter, a volume previously not reached in an entire year. Ares brought two continuation vehicles to market in the quarter, for example. While the size of the transaction is not finalized and subject to change, Ares is seeking about $1 billion for each, with one involving senior loans and the other junior debt assets. Ares’ own secondaries platform, one of a growing number of dedicated pools of capital in the asset class, is participating in the deal as well. Leverage is also not finalized, and more details were not yet available on the PJT Partners-advised deals.
But it’s not just the largest firms. StepStone Group is also in market with a continuation vehicle involving senior private credit assets, looking for about $1 billion for the transaction. The lender, which is also an active participant in credit secondaries space as a buyer, is also looking to raise new capital as part of this deal, which involves offering exiting LPs and separately managed account interests liquidity while moving the underlying assets into a new vehicle with new GP economics.
Meanwhile, Eldridge is also seeking around $800 million for a continuation vehicle involving senior loans in a deal being advised by Jefferies and PJT Partners.
New Mountain Capital also brought a less common type of GP-led deal to the market, seeking about $500 million for a deal that would reduce the BDC’s exposure to PIK by moving some of these investments outside of the BDC. This sort of secondaries transaction could become more common if GPs see it as a way to reduce PIK exposure from BDC portfolios, where PIK may be viewed more unfavorably and weigh on trading levels in ways that it would not if held outside of the public vehicles.
The flurry of new deal activity has also spurred new investments in and allocations to credit secondaries buyers. For one, State Street Investment Management made a minority equity investment in secondaries firm Coller Capital in November. Elsewhere, the Reinsurance Group of America made a strategic investment in credit secondaries firm FoxPath Capital Partners, including a multi-fund anchor commitment.
The secondaries market’s newfound heft may appear sudden, but it has been years in the making. As the primary private credit market ballooned in size, secondaries strategies became increasingly viable, and new dedicated pools of capital emerged in the space — some from veterans of the private equity secondaries space, like Pantheon and Coller, and others from the primary market GPs themselves, including Ares and Apollo.
This rise in the number of dedicated buyers may have contributed to the tightening of pricing experienced in 2025, where the customary discounts expected in secondaries transactions seem to have been diluted by elevated competition for deals. Things could change in 2026, however, as the influx of primary market GPs bringing continuation vehicles to the market could tip supply and demand dynamics back in favor of buyers, who have only recently demonstrated their capacity to absorb meaningful volume in the space.
“A GP 18 months ago may have decided to sit on the sideline with a multi-billion continuation fund because they were concerned about going to market and getting a bad result, or maybe inferior pricing. But the conversation today is a bit different in that the market definitely can absorb that volume,” said Ed Goldstein, partner and CIO of Coller Credit Secondaries, in an interview with LCD earlier this year.
New areas
Demand for private credit loans continues to outpace supply of them.
In the search for attractive investment opportunities, private credit managers continued to make headway into the asset-based finance market, branding this the era of “Private Credit 2.0” as lenders seek to capitalize on what firms like Apollo have called a $40 trillion addressable market. Lenders have benefited from a pullback among banks, driven by incremental changes to accounting and regulatory standards, market participants say.
Much of that market opportunity represents investments in infrastructure finance, including the ongoing surge of investment in data centers to provide hardware for the AI industry. Blue Owl and Meta closed a long-awaited, $27 billion joint venture during the quarter to develop the Hyperion data center campus in Louisiana, with Blue Owl shouldering 80% of the development budget. Blue Owl’s investment will be backed by debt provided by PIMCO and other bond investors. For its part, Blue Owl called its position in digital infrastructure “veritably monumental,” spanning 100 data center projects consuming a combined 10 cities’ worth of power. The lender estimated the total pipeline for digital infrastructure finance at more than $100 billion.
Featured image by Philippe LEJEANVRE/Getty Images
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