Q1 2026 Credit Market Update
- Chris Sweet, Managing Director | Head of Capital Advisory
- Scott Thomas, Senior Director, Capital Advisory
- John Stine, Senior Vice President
In this installment of the Portage Point Credit Market Update, the Capital Advisory team summarizes Q1 2026 market activity, benchmarks results against prior periods, comments on key credit market developments and offers insights into the outlook for the remainder of 2026.
KEY HIGHLIGHTS
Credit markets entered 2026 expecting a shift toward mergers and acquisitions (M&A)-driven issuance and away from opportunistic activity supported by
- Significant private credit dry powder
- Robust lender demand
- Credit spreads at or near record low levels
- Persistent backlog of unrealized exits for private equity (PE) investors
- Stable (albeit uncertain) inflation and rate environment
Q1 2026 reflected a more disciplined environment, as macro, geopolitical and sector uncertainty reduced issuance and risk appetite driven by
- Ongoing tariff and trade policy uncertainty
- Rising geopolitical tensions, impacting oil prices, global energy markets and reducing the near-term probability of further rate cuts
- Increased software sector volatility, driven by Artificial Intelligence (AI)-related market disruption following Anthropic’s launch of Claude Cowork
- These dynamics reduced issuances year-over-year. M&A activity ramped more slowly, while repricing opportunities were largely exhausted after elevated activity in 2024 and 2025
Despite a slower start, credit markets remain constructive. Liquidity is strong, lenders remain active and borrowers retain multiple execution paths.
- AI-driven software industry disruption drove a meaningful sell-off of syndicated loans and publicly traded BDCs, while non-traded BDCs experienced significant redemption requests
- Total institutional loan activity rebounded to $241 billion, up 54% sequentially from Q4, but down 32% year-over-year
- Leveraged loan issuance volume totaled $182 billion, up 25% sequentially from Q4, but down 9% year-over-year
- Net new (non-refinancing) issuance remained resilient, supported by continued M&A and acquisition financing
- Lower-rated credits experienced meaningful widening, while higher-quality credits remained well-supported
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Portage Point is a business advisory and investment banking business focused on providing holistic advisory services and solutions to sponsored and non-sponsored middle market companies. The Capital Advisory team partners with clients to evaluate capital requirements, structure tailored financing solutions and run competitive and efficient financing processes to provide certainty of execution and optimize financing outcomes based on unique client goals and priorities.
The team leverages years of transaction execution experience and deep lender relationships across the credit provider landscape to develop an effective process strategy and craft thoughtful marketing materials which highlight attractive credit attributes of the business while addressing key lender concerns. In the constantly evolving private credit and middle market financing landscape, middle market companies, financial sponsors and management teams require an experienced and trusted advisor to navigate this marketplace and secure the financing required to fund business objectives.
The Portage Point differentiated, cross-functional platform enables the firm to add value for clients across a range of capabilities and solutions prior to, during and after a financing transaction, including financial and operational due diligence, transaction execution services, performance improvement initiatives and value creation and capture initiatives.
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Investing in securities involves risk, including the potential loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount originally invested. Past performance is not indicative of future results. All investments carry some degree of risk, including the potential for loss of principal.
Private credit typically refers to debt investments in privately negotiated loans or debt securities. Private credit offers potential benefits such as higher yields, customization of terms, and a focus on steady income generation, but it comes with drawbacks like illiquidity and higher credit risk due to the nature of borrowers involved.
In contrast, broadly syndicated loans are large loans provided by a group of lenders to a single borrower. Broadly syndicated loans are typically rated and have standardized terms, making them more transparent and easier to benchmark. However, they may offer lower yields and less flexibility in terms compared to private credit.
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