Leveraged finance (LevFin) issuance across the US and European institutional loan and high-yield (HY) bond markets totalled USD 1.73tn-equivalent in 2025, the second-highest annual level on record, according to Debtwire data.

LevFin issuance followed a stop-start pattern as investors navigated periodic volatility driven by trade policy, concerns over economic growth and inflation, weakness in sectors such as autos and chemicals, and structural shifts related to artificial intelligence (AI). Despite these challenges, LevFin markets proved resilient, delivering mid- to high-single-digit total returns for the year, while remaining largely unaffected by geopolitical tensions.

Record collateralised loan obligation (CLO) issuance and sustained high-yield fund inflows during the year underpinned demand for paper and kept spreads near all-time lows. While strong technicals supported issuer-friendly conditions, investors became increasingly credit selective, directing capital towards higher quality credits and sectors less exposed to structural and macroeconomic headwinds.

Refinancing activity, including loan repricing, continued to dominate LevFin volumes for a third consecutive year, while the supply of new-money paper remained underwhelming. Roaring merger & acquisition (M&A) and leveraged buyout (LBO) activity failed to materialise in 2025, as valuation gaps, especially for sponsor-backed LBOs, remained a key hurdle, with dividend recapitalisations continuing to fill the gap where private equity exit processes stalled.

Nevertheless, M&A and LBO underwriting activity accelerated in the final quarter of the year, with several jumbo cross-border loan and bond deals entering the pipeline for 2026, including those for Electronic Arts, Sealed Air, BASF Coatings, and Hologic. As such, the current pipeline points to a more balanced mix between new-money and refinancing transactions, at least at the start of 2026.