Discover the impact of 2025 events on the leveraged finance market and read our ten predictions for 2026 in our concise annual report.
2025: The Year in Review
The leveraged finance market demonstrated notable resilience in 2025, recording its most active year since 2021 with record U.S. and European leveraged loan and high-yield bond issuance alongside continued expansion in private credit. Activity was driven largely by refinancings, repricings, and liability management transactions, leading to larger average deal sizes, while easing inflation, central bank rate cuts, and tightening spreads supported investor risk appetite keeping defaults contained and terms broadly borrower-friendly.
Key Themes from 2025:
- The High Yield and Leveraged Loan Markets Rebound: Both the U.S. and Europe saw market rebounds for leveraged finance products in 2025.
- M&A Megadeals Increase Values in a Mixed Market: Deal volumes were lower than expected, but a focus on high-quality assets and a handful of megadeals drove record aggregate values.
- The Evolving Role of Private Credit: Private credit continued its emergence as a critical player in the leveraged finance market, extending its reach to large-cap deals.
- Distressed Debt Plays a Part: Distressed debt and liability management activity increased notably in both the U.S. and Europe, as financially stressed companies sought alternatives to formal bankruptcy.
- The AI Boom: AI both drove demand and transformed the market practices.
- A Digital Assets Era: 2025 was a pivotal year for digital assets, which began moving toward more structured, institutional-grade adoption.
- De-Regulation (and Re-Regulation) Creates Challenges and Opportunities: Regulatory changes (in the U.S. and internationally) affected the international financial markets in key areas such as banking and securities, trade, taxation, crypto and reporting requirements.
- ESG Financing Transforms: Institutional investors started moving away from the label-based ESG financing toward outcome-linked or impact-linked financing and focusing on the achievement of verifiable results, while also expanding the strict label of ESG.
Ten Predictions to Shape 2026
Looking ahead to 2026, the leveraged finance market is expected to remain resilient. Read our ten predictions for market developments in the coming year!