Direct Lending Activity Rises from Q2 Lows but Remains Below Q1 Levels
Sponsor-backed direct lending activity improved in the three months ended August 31, with volume reaching $28 billion across 124 deals. This marks an increase compared to Q2's $23 billion and 101 deals but remains below Q1’s $45 billion and 133 deals. Year-to-date through August, direct lending totaled $87 billion in 322 deals—27% less than the same period last year—which suggests continued caution among sponsors despite a quarterly rebound. Buyout financing followed a similar trend: lenders backed 50 leveraged buyouts (LBOs) for about $14 billion, up from Q2 but still below Q1’s figures. Year-to-date LBO volume of $44 billion across 135 deals also trails last year's performance. Healthcare accounted for the largest share at 20% YTD in new-issue direct lending, while technology saw a decline to 16%. Spreads have widened significantly compared to earlier this year. Direct lenders financed nearly as much LBO volume ($14.4 billion) as broadly syndicated loans (BSLs), which totaled $13.4 billion over the same period.
Topics: deal volume direct lending economic activity private credit