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In 2024, the US institutional loan market hit a record $1.4 trillion in activity fueled by:
Despite three consecutive rate cuts, loans gained 9.4% in 2024 just from coupon clipping. Opportunistic and speculative borrowers refinanced and repriced at a record clip, with sub investment grade borrowers taking advantage of the accommodating credit conditions to achieve the narrowest spreads since the Global Financial Crisis.
The $1.4 trillion mark was 60% higher than 2021 volumes and 41% higher than the previous peak in 2017. With an expectation that new leadership in the white house will reduce regulation, there is reason to believe momentum will continue in 2025 alongside buoyant equity markets and tight credit spreads.
However, stripping away repricings, new-issue loan volume was $501 billion in 2024. While still more than double 2023 and 2022 levels, it lagged 2021 by 18% and fell just short of 2017. In addition, issuance not related to a refinancing, which represents net supply for loan investors, totaled $242 billion in 2024, roughly in line with the 10-year average and 45% below 2021.
Competition in private credit has accelerated. In an overcrowded market, it is becoming increasingly difficult to stand out, leading to more challenging fundraising. Further, private market leaders are raising concerns that private credit is becoming a consensus trade. When things are positive, it’s all good, but what happens when a reversal occurs?
SOURCES
Pitchbook: US Credit Markets Quarterly Wrap, Jan 2025 - US Credit Markets Quarterly Wrap
Apollo: Outlook for private markets 2025, Jan 2024 - Outlook for private markets 2025
Bloomberg: Private Equity Retakes Fundraising Crown From Credit, Dec 2024 - Private Equity Retakes Fundraising Crown From Credit at iCapital
Bloomberg: Private Equity Is Piling Debt on Itself Like Never Before, Sep 2023 - Private Equity Is Piling Debt on Itself Like Never Before
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