Trick or Treat: It’s a chilly Halloween this year for the riskiest of borrowers. In a rising rate environment, lenders are handing out candy selectively, preferring higher quality issuers. LBO volume is down materially for those with weaker credit stories, however the actual risk premium in lower middle market private credit is holding steady…for now.
- Spooked Lenders: B- issuers now represent the smallest percentage of the leveraged loan market since 2022, reflecting a more risk-averse lending environment and a flight to quality.
- Fewer Treats to Go Around: Private credit issuers (who are typically non-rated) are also seeing financing challenges, with Q3 middle market LBO volumes down ~60% year-over-year.
- Same Costumes as Last Year: Interestingly, while B- leveraged loans spreads widened ~76bps over the past 12 months, lower middle market private credit spreads are relatively flat vs Q3 2025. Prospective issuers may find it prudent to lock in today’s spreads.
Connect with Our Team
- Jonathan Zucker, Managing Director, Head of Capital Advisory, jzucker@Intrepidib.com
- Boris Zikratov, Director, Capital Advisory, bzikratov@Intrepidib.com
- Kevin Striepe, Vice President, Capital Advisory, kstriepe@intrepidib.com
- Anish Balabhadra, Analyst, Capital Advisory, abalabhadra@intrepidib.com
- Kyle Sutherland, Analyst, ksutherland@intrepidib.com