Some private credit loans are pricing 50-100 bps higher than late-2025 levels as the market enters a period of price discovery, ignited by fears of AI disruption in the software sector.
For much of 2025, spreads in the private credit market plateaued at their lowest level since the decade began, with market participants hoping that increased deal volume would improve supply/demand dynamics.
Now, credit conditions are becoming more lender-friendly, sources say.
Already, these conditions are materializing in wider loan spreads. Take, for example, WWEX Group’s $4.815 billion unitranche loan supporting a buyout of the company by Thoma Bravo, which emerged in early March. Pricing was completed in Q1 at S+575.
That financing package, led by Ares Capital, brings together 33 lenders, market sources said. The company operates a global shipping logistics and freight services platform. It will be merged with Auctane Inc., an ecommerce shipping software provider.
Elsewhere, the digital employee experience management platform Nexthink SA obtained a $750 million private credit package backing a buyout of the company by Vista Equity Partners. The loan was issued at S+550, LCD reported earlier this month.
That spread represented a premium to recent levels. Other deal terms similarly reflected a “lender-favorable” deal environment, market sources said.
“Given current market headwinds, deals like Nexthink could signal a shift for this next vintage of transactions,” a source familiar with the deal told LCD.
Market participants echoed that sentiment in LCD’s Q1 Global Private Credit Survey conducted between March 3 and March 12.
In Q4, only 6% of respondents expected a “plain vanilla” $50 million EBITDA business in a non-cyclical industry to price a loan at S+550 or higher. This quarter, that share has ballooned to 33%, the recent survey showed.
That shift is not expected to reverse anytime soon. Market participants indicated they felt the same loan was even more likely to price above S+550 six months from now.
How low can you go?
Borrower-friendly trends have dominated the market in recent years.
Since late 2023, private credit borrowers have found themselves surfing a repricing wave that swept across large swaths of the market. That wave had mostly subsided by mid-2025, since many borrowers had already refinanced higher-priced debt.
But even as refinancing volume dipped, pressure on new-issue spreads persisted due to a supply/demand imbalance as M&A and buyout activity remained subdued.
A brief reprieve from these pricing pressures arrived in Q2 2025, as the market grappled with rapid and dramatic “Liberation Day” increases in tariffs set by the Trump administration, which virtually shuttered the BSL market. There was some evidence of modest spread widening on private credit loans at that time, on the order of 25-50 bps in smaller deals, but little to none on loans to larger companies. Deal volume was muted, however.
But market participants say spreads narrowed again as the aggressive tariff regime was gradually watered down, relieving uncertainty in the market.
All told, the largest share of private credit deals tracked by LCD in 2025 priced below S+500, with a majority landing between S+450-499. Some loans priced even lower.
Moving on up
So far, this round of spread widening appears to still be in its early stages.
“With the recent volatility, you’re seeing price discovery,” said Oaktree’s Christina Lee, co-portfolio manager of US private debt, speaking at the SuperReturn North America conference in Miami on Monday. “You’re seeing now, instead of S+450, it’s more like S+500. I think it’s too soon to tell where pricing will land, but we’re starting to see that in the market.”
That sentiment has been echoed on recent earnings calls for business development companies, where some lenders have insisted that this is a moment of greater opportunity for lenders.
“We’re somewhat optimistic that we see some spread widening here,” said Goldman Sachs BDC CIO Dan Callahan on a Feb. 27 earnings call. “It’s early days yet. I think a lot of people are still in price discovery. But we’re seeing anywhere from 25-50 basis points in both coupon and OID. So, you know, roll that through the model.”
An increase in redemption requests among non-traded BDCs and interval funds is also driving wider spreads, lenders say. In a March 17 letter to shareholders, Sixth Street Specialty Lending pointed to liquidity pressures on BDCs as a driver of credit tightening, following what it characterized as a prolonged period of returns falling below lenders’ cost of capital.
“If you believe in efficient markets, public BDCs trading at significant discounts versus similar private counterparts is an arbitrage that will resolve over time. Capital will be reallocated, and the public BDC sector should benefit as the liquidity-taking abates and discounts normalize,” the lender wrote.
“The rebalancing of the ecosystem will take time to fully materialize, but it should ultimately result in the widening of new origination spreads and a healthy recalibration of the supply-demand dynamic for private capital,” Sixth Street said.
In a Feb. 23 research report, UBS Global Research said the private credit market should expect sustained upward pressure on loan spreads in the coming months.
Overall, “the market is in the early innings of repricing,” the firm said.
The shift tracks similar pricing dynamics in the broadly syndicated loan market, where new-issue BSL spreads have widened materially from their January lows. In the 30 days to March 12, the average spread on term loans to borrowers rated BB or BB- widened to S+241, nearly half a point higher than in January. Meanwhile, the average spread for the B or B+ rated cohort widened by nearly a point, to S+379.
Janelle Bradley in Miami contributed to this report.
Featured image: Shutterstock
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