Debt Download

In the News

• The broadly syndicated loan (BSL) markets rebounded slightly in the first half of May, with net supply of $2.4 billion through May 16. According to Octus, almost half of the new loans issued were for M&A deals, a sign that the market is opening up again after last month’s tariff news. Borrower-friendly flex returned, with a 5:1 flex score, the most favorable to borrowers since February; however, spreads ticked up to the highest since August 2024, with the single B clearing spread at S+424 (S+380/98.7 OID). Spreads on debt to lower-rated borrowers are likely to go higher still, according to BlackRock, as reported by Bloomberg and as further discussed below. 
• The private credit market seems to be withstanding this environment better than the BSL market and, according to the LSTA, now exceeds $1.5 trillion and will continue to grow, making it bigger than either the BSL market or the high-yield market (each at about $1.4 trillion). As is typical when volatility spikes in the public markets, private credit has picked up the slack—and several deals—according to Blackstone and reported by LCD. “Private credit will continue to be there,” providing a source of funding that had not been available during prior financing droughts. 
• Recent earnings statements from direct lenders provide further insight as to how they’re weathering the recent spate of market turmoil and volatility. Ares Capital reported that private loan spreads increased 25 to 50 basis points since the tariffs were first announced in early April. Ares also noted that it saw almost all of its deals close without being pulled. The firm saw particular demand for its “vanilla and opportunistic strategies.” Blue Owl saw its portfolio grow as “current market volatility is accruing to the benefit of private lenders,” even as refinancing activity has tailed off. Oaktree Specialty Lending noted that direct lenders are gaining market share among larger, upper-market borrowers, as these debtors are “somewhat insulated from tariffs.” Even so, Oaktree’s CEO sees private credit potentially following BSL into “double-digit defaults,” as private credit is “poorly underwritten, in the main.” Apollo Global, meanwhile, expects public and private credit to further converge to the point that “we will not know the difference between public and private credit in the investment-grade market.”  
• While debt-market fundamentals are in better shape than in prior downturns, an extended period of uncertainty lasting for several quarters “could lead to a more significant downturn,” according to BlackRock, as reported by Bloomberg. While BlackRock does not expect a “massive uptick” in defaults, Fitch does expect default rates to go up by 50 basis points from its prior projections, revising its global leveraged finance outlook to deteriorating from neutral. S&P is standing by its forecast…“for now.” In fact, JPMorgan Chase & Co.’s chief executive officer, Jamie Dimon, told the firm’s investors that “credit today is a bad risk” and “[t]he people who haven’t been through a major downturn are missing the point about what can happen in credit.” Similarly, Sixth Street’s co-chief investment officer Josh Easterly told Bloomberg that “private credit markets are relatively complacent” and “spreads aren’t moving as much as they should.” As a result of an “imbalance between supply and demand”, with private credit funds flush with cash but fewer investment opportunities, lenders are competing for deals, resulting in lower spreads notwithstanding a riskier market. Unsurprisingly, restructuring advisors such as FYI Consulting and EY-Parthenon have seen a significant uptick in business from private credit lenders seeking assistance with “problem loans.” According to Octus, stressed companies are engaging restructuring advisors to assist with “projections for various tariff scenarios,” in particular for the second half of 2025, with one advisor predicting more upcoming bankruptcy filings.

Goodwin Insights – Financing Toolkit: Preferred Equity 

We’ve focused on NAV financings in several editions of the Debt Download, but how can preferred equity be used instead of, or in addition to, NAV facilities as part of the fund financing toolkit? Goodwin partners Ravi Chopra, Robert Emerson and Ed Saunders provide an overview of preferred equity, its key terms and structure and how it differs from debt financing in this Global Legal Insights article. 

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For inquiries regarding Goodwin’s Debt Download or our Debt Finance practice, please contact Dylan S. Brown and Reid Bagwell.

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