U.S. Private Credit: 2026 Outlook & 2025 Review
Winnie Cisar: Global Head of Strategy -CreditSights
Zachary Griffiths, CFA: Head of IG & Macro Strategy - CreditSights
Ian K. Walker, J.D.: Head of Legal Innovation - Covenant Review
John D. Kim: Director, Covenant Analyst - Covenant Review
Andrew Hedlund: Managing Editor - LevFin Insights
Kathleen Tang: Analyst, Strategy - LevFin Insights
7 January 2026
Insights into U.S. Private Credit: 2026 Outlook & 2025 Review, including:
- Market Volume and Competitive Dynamics: Explore how private credit maintained robust deal flow at ~$140 billion in 2025 despite BSL markets recapturing share through $48 billion in takeouts, and what this means for market positioning in 2026.
- Spread Compression and Return Expectations: Understand how direct lending yields fell below 10% for the first time in three years and what our U.S. Private Credit 2026 Outlook reveals about future returns amid tightening spreads and Federal Reserve rate cuts.
- Documentation Evolution and LMT Risks: Learn how high-profile liability management transactions at Pluralsight and First Brands are reshaping covenant protections and what lenders must watch as documentation converges toward BSL standards.
- Regulatory Shift and Bank Competition: Discover how the withdrawal of leveraged lending guidelines in December 2025 enables banks to compete more aggressively at higher leverage levels, potentially disrupting private credit’s competitive advantage.
- Systemic Risk Assessment and Transmission Mechanisms: Identify the five key areas to monitor for systemic stress, from bank exposure to NDFIs (11.2% of loans) and insurance-PE partnerships to rising PIK usage and sector concentration risks in technology and healthcare.
Executive Summary
This report provides our outlook for U.S. Private Credit in 2026, highlighting developments in deal volume and pricing, the outlook for fundamentals, evolving documentation and liability management transactions. As private credit continues to grow, we review its advancing role within the broader financial system to identify interconnectedness that could create systemic vulnerabilities.
Introduction & Overview
The private credit market demonstrated remarkable resilience in 2025, navigating a complex landscape of macroeconomic factors, tightening spreads, evolving documentation standards and shifting competitive dynamics with public markets. As we enter 2026, the asset class stands at an inflection point—balancing robust investor demand and expanding deal flow against mounting fundamental pressures and compressed returns.
This report examines the critical developments that shaped private credit in 2025 and identifies the key themes likely to define the market in 2026. Private credit deal volume remained robust at nearly $140 billion despite an 11% year-over-year decline, while broadly syndicated loans recaptured market share through approximately $48 billion in takeouts from private credit. Spreads compressed meaningfully across the capital structure, with direct lending yields falling below 10% for the first time in over three years, driven by Federal Reserve rate cuts and intensifying competition for deals.
