Private Credit Loses Pricing Edge in Competition for PE Borrowers
In recent months, private credit has lost its pricing advantage over syndicated loans as banks gain ground in refinancing deals. This shift is evident from the case of Catalent, which recently switched to a $4.1 billion syndicated loan after initially using direct lenders in 2024 for an acquisition by Novo Holdings. The change reflects broader trends driven by redemptions from retail investors pressuring private credit firms like Ares, Apollo, and KKR. Retail outflows are forcing these lenders to adjust their strategies, reducing lending activity and making the syndicated loan market more attractive. For example, FDH Aero secured a $1.1 billion term loan via banks for its Bain Capital acquisition after earlier relying on direct lenders. Additionally, private credit spreads have widened compared to Q1 2026, with new-issue spreads averaging 502 basis points in the three months ending August 31. The growing gap between syndicated and private credit loans—now at a spread of 162 basis points—is further evidence that banks are becoming more competitive. This trend is likely to continue as direct lenders face ongoing redemption pressures from their business development companies.
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Topics: direct lenders leveraged finance private credit refinancing syndicated loans