Americas Primary Market 2026 Outlook: Optimistic Mood Expected to Spur Leveraged Loan, HY Bond Primary Issuance; Favorable Conditions for M&A, LBO Dealmakers to Ignite Deal Flow

Relevant Items:
Americas Primary Market 2025 Wrap
Americas Private Credit 2025 Review
Primary Tracker Database

Leveraged finance participants are entering 2026 with a more optimistic outlook on primary high-yield bond and leveraged loan loan issuance, after a series of market shifts left dealmaking in 2025 more subdued than many had anticipated.

Although last year closed with dealmakers pointing to AI-related uncertainty and tariff concerns as key challenges, early primary activity this year has been marked by strong buyside demand, market sources say, with investors hungry to put money to work on financings tied to M&A and LBO activity.

“We saw market activity pick up and technicals were on a strong footing as we closed the year,” said Michele Cousins, global head of leveraged capital markets at UBS at a recent roundtable, adding that still, investors remain selective, with risk appetite bifurcated across sectors amid lingering headline risks.

Nonetheless, several mega LBO deals are expected to soon test investors’ appetite in the primary market, notably Electronic Arts’ roughly $20 billion debt package tied to its record-breaking $55 billion buyout by an investor group led by Silver Lake. Among other highly anticipated deals financing LBO activity is Sealed Air’s imminent $8 billion debt financing supporting its $10.3 billion acquisition by CD&R, which is expected to come to market this spring.

Hologic’s $7.25 billion and €1.3 billion leveraged loans backing its $18.3 billion take-private by Blackstone and TPG was an early sign of buyside fervor for new acquisition financing. The offering drew robust demand from buysiders this January, underscoring investors’ readiness to deploy capital as dealflow accelerates.

Other M&A and LBO related primary deals, such as Finastra TCM and Composecure, have also been well received, as reported. These deals, among others, like Tailored Brands’ oversubscribed bond funding a dividend, are setting the mood for how primary deals have been received this year with great success.

So far in 2026, $77 billion in leveraged loans priced among 54 deals, while $22.6 billion in high-yield bonds priced among 20 deals, according to Octus data. For 2025, $825.9 billion in leveraged loans priced among 745 deals, while $352.5 billion in high-yield bonds priced among 442 deals, according to Octus data.

Issuance by use of proceeds for both loans and bonds but excluding repricings is shown in the charts below. For year-over-year comparisons, Octus provides data for the past 13 months.

With the primary markets being open for corporate issuers to borrow, market participants say that other factors, such as accommodative regulatory policy, will further encourage deal flow.

“The consensus among market participants is an expectation of healthy M&A activity in 2026,” said Adam Abbas, portfolio manager and head of fixed income at Oakmark.

While the current administration is more friendly from an antitrust perspective and capital markets are open, a constraint on supply remains, Abbas added. “People want paper, and there isn’t a lot of supply out there, so any excess supply from M&A will be well absorbed,” said Abbas.

Leveraged finance participants say that these factors, coupled with current market conditions, are more favorable to dealmakers’ structuring acquisitions than they have been in a long time.

“Conditions are more ripe and the regulatory environment is much more favorable to acquisitions than it has been in years,” said Kris Ring, a partner in Goodwin’s private equity group, echoing that a looser regulatory environment will spur a rebound in dealmaking.

Still, one of the biggest concerns for both buy-side and sell-side participants is whether a deal will clear antitrust, risk and regulatory approvals, Ring said. While the approval process can be timely and expensive for sponsors, having more certainty around the process easing will foster activity in the acquisition market, he added.

Netflix’s bid to take over entertainment giant Warner Bros. for $83 billion would also set a unique precedent from a regulation standpoint, market participants say. The proposed deal, which would require a significant amount of debt financing, would merge Warner Bros.’ film and television studios and streaming services with Netflix.

Participants emphasized that given the borrower-friendly environment, sponsors are pushing more aggressive deal terms across the board. For example, several leveraged finance professionals say that portability, which allows a change of control without triggering mandatory repayment of the debt, will be an increasingly popular trend across new issuance this year.

“We’re continuing to see changes that favor sponsors, whether that’s in more aggressive EBITDA add-backs or people trying to push the high-water mark on EBITDA, as well as the deterioration of mandatory prepayments and an increase in prepayment premium carve-outs,” said Ring.

Such changes come as a result of escalating competition among lenders across the broadly syndicated loan and private credit markets, which is forcing some to make concessions. “There’s a lot of dry powder, and lenders are fighting for good deals,” added Ring.

Although participants say there will always be competition between both the BSL and private credit markets, Cousins says that given where credit spreads were in 2025, there was actually less competition in the past year from private credit lenders, especially for high quality deals.

“The balance of trade between [broadly syndicated loans] and private credit will naturally continue to ebb and flow, largely depending on the level of volatility that is in the public markets,” said Cousins on both markets. In addition, Cousins noted that BSL underwrites last year were less frequently dual-tracking with private credit than in previous years.

Many leveraged finance participants indicate that they feel optimistic about a new money pipeline, though others note that some sponsors may face a more challenging underwriting environment this year in sectors that have historically dominated leveraged buyouts.

“We’re going to see pressure from tariffs and other sources of inflation on software services, healthcare services and business services,” said Dan Zwirn, CEO of Arena Investors, on what sectors may face difficulties this year.

Rising material and labor costs, alongside idiosyncratic risks tied to AI disruption, are beginning to complicate underwriting for these businesses that have long been considered “the darlings of large-scale private equity and private credit buyers,” Zwirn added.

Still, while AI-related uncertainty may continue to weigh on deal flow as it did in 2025, software and technology make up a significant portion of the forward-looking deal pipeline so far this year. Oracle’s $38 billion leveraged loan package to fund two data centers, as well as Silver Lake and CPP Investments-owned Qualtrics’ roughly $5 billion leveraged loan backing its acquisition of Press Ganey Forsta, rank among the sizable software financings investors are watching in the first half of the year.

“The market best positioned regarding AI is the high-yield market,” said John Lloyd, global head of multi-sector credit at Janus Henderson Investors, pointing to strong investor demand for bond deals in 2025 from bitcoin miners that are backed by large companies, such as Google, to build data centers.

“Those bond deals do extraordinarily well in the market, and we will continue to see that type of debt in the high-yield market this year,” Lloyd said.

Other leveraged finance participants have echoed the resilience of market conditions heading into 2026.

“In high yield, fundamentals remain relatively strong,” said Abbas on the temperature of the high-yield bond market. “There’s slight deterioration in fundamentals, but it’s healthy. It’s been a good year for high-yield.”

Average high-yield bond spreads are currently 272 bps as of Jan. 28, according to ICE BofA data, about 10 bps tighter since the beginning of the year. Roughly half of the high-yield market is trading at spreads inside 200 basis points, according to a recent Guggenheim Investments report.

“Returns in 2026 are expected to be more muted compared to 2025, emphasizing the importance of disciplined credit selection,” Guggenheim said further in the report.
As for the leveraged loan market, investors say that a lower interest rate environment will support the value of the asset class.

“Flows will start to indicate that,” said Abbas, on his outlook of the leveraged loan market. “Buy-siders will move positions from high-yield straight to leveraged loans, and I think we’ll see a healthier version of that asset class in 2026.”

The secured overnight financing rate for leveraged loans is currently 3.64% as of Jan. 28, according to the New York Fed’s website, tighter than 3.75% at the beginning of the year.

Average spread and coupon for loans and bonds, respectively, by rating band are detailed in the charts below. Because of the limited activity of CCC rated issuance, only the months with issuance are shown.

Pricing by rating category is shown below:

Meanwhile, for CLOs, the U.S. market heads into 2026 after a year of historically heavy issuance, according to Octus’ CLO coverage.

For full-year 2025, U.S. BSL CLO issuance volume reached $472.02 billion across 1,045 transactions, while U.S. private credit CLO issuance totaled $84.73 billion across 145 transactions. Unlike the private credit CLO market, where new-issue activity was stronger at $42.85 billion and exceeded reset volume by $3.9 billion, the U.S. BSL CLO market recorded higher reset volume of $183.68 billion across 395 deals, surpassing new-issue volume of $173.28 billion across 367 deals.

Overall, leveraged finance market participants say that this year’s focus on deregulation and fiscal expansion, combined with pent-up dry powder ready to be deployed, will unbridle M&A activity that has previously been stifled.

“This year is really the perfect storm for credit because we have a fiscal expansion and simultaneously also have monetary easing,” said Neha Khoda, head of U.S. credit strategy at Bank of America. “Historically, whenever we’ve seen these happen concurrently, it’s been good for credit.”