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Analysis US private credit
US direct lending holds steady in 1Q
by Ben Watson, Debtwire
Fears about AI-impacted software companies took their toll on US direct lenders in the first quarter, yet overall market volume remained resilient as other sectors took up the slack
US corporate direct lending faced a number of headwinds at the start of 2026, resulting in the lowest quarterly deal count for a year and a decline in overall volumes.
However, although in the first quarter the number of deals dropped to 838, transactions were larger, which meant overall deal volume remained respectable. While down on the prior two quarters, this figure still came in ahead of 1Q and 2Q 2025 at USD 82bn.
US direct lending volume
Source for all data: Debtwire
838
Number of US direct lending deals in 1Q 2026
Across global markets, the first quarter was marked by a frenzy of fear about artificial intelligence and potential overexposure to AI-impacted software companies. The US direct lending market, with its once high-flying tech-heavy funds, became the focus of these concerns. The subsequent redemption pressure in semi-liquid BDC vehicles also rattled markets. Yet beyond the decline in deal count and volume, direct lending remains remarkably resilient by most other measures.
US direct lending
US sector breakdown 1Q26
US average senior/unitranche margin vs average first-lien institutional loan margin
Source for all data: Debtwire
Unitranche margins hold steady
In particular, unitranche margins remained close to 500bps over the reference rate, broadly in line with the prevailing average over the past two years. This represents a premium of around two percentage points over the leveraged loan market’s overall weighted average spread.
Technology, media and telecommunications remained the leading sector in terms of direct lending by volume, at over USD 16bn. However, there was a drop versus previous levels. In 2025, TMT accounted for more than a third of all issuance. This fell to 20% in the first quarter. Industrials are close behind, at USD 14bn.
82
bn
€
Volume of US direct lending deals in 1Q 2026
While the public leveraged capital markets posted an impressive USD 314bn in overall volume in the first quarter of 2026, direct lending outshone the leveraged loan and high yield bond markets in the share of capital raised to fund new money transactions.
Buyouts dominate volume
In direct lending, leveraged buyouts totalled USD 26bn, accounting for 32% of total volume. This figure is triple the share seen in high yield bonds and double that achieved in the leveraged loan market, even if nominal leveraged loan LBO volume remained higher.
Refinancing continued to dominate the public markets. It accounted for 71% of total volume in leveraged loans and 55% in high yield bonds. In direct lending, refinancings constituted less than a fifth of overall volume.
