Credit Market Opens Up: Tailwind for Platform LBOs and GP Financing

Credit conditions are proving to be a tailwind. On the deal side, new-issue spreads on LBO loans have fallen to their tightest levels since the Global Financial Crisis, and new-issue loan yields to their lowest since 2022, as the Fed's rate cuts and a resurgent BSL market give sponsors materially cheaper financing than they have had in years. According to PitchBook, platform LBOs, the higher-leverage deals sponsors pull back from when credit is expensive, are projected to climb to 25%+ of total US PE deals in 2026, with platform-LBO deal value at its highest since the 2021 peak. With more than $1 trillion of US PE dry powder still on the sidelines, cheaper financing favors platform buyers.

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The same easing is evident on the other side of the GP's balance sheet. As fee income compresses and GP commitment requirements rise (see Section I), more sponsors are turning to non-dilutive financing secured against contracted management fees and unrealized carry to bridge the gap. As a result, GP and management-company financing originations more than doubled YoY in 2025 as rates fell and demand surged.

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