Any question about whether financing markets are back was put to rest in 2025. We discussed last year (here) that the debt markets entered 2025 hungry for new supply and primed to facilitate M&A. Over the course of the year, U.S. corporate bond issuance reached over $2.2T, an increase of more than 12% from 2024. As opportunity knocked, lenders answered, resulting in a surge of activity that provided borrowers on all ends of the credit spectrum with access to a broader range of financing sources and solutions than ever before.
Investment Grade (IG) Debt: New Technology
With the boom in mega M&A deals came the return of mega acquisition financing commitments. These include the likes of Netflix, which obtained $67.2B worth of committed financing to support its acquisition of Warner Bros; Abbott Laboratories, which received $20B in commitments to fund in its acquisition of the early cancer detection company Exact Sciences; and Global Payments, which had $15.7B of commitments supporting its concurrent acquisition of Worldpay and divestiture of its Issuer Solutions business.
The IG market also saw innovative technology come to the fore as banks competed for their share of these and other large commitments. IG corporate buyers have historically relied on the traditional 364-day bridge loan commitment to finance major acquisitions. As discussed in our recent memo (here), market participants have embraced a new structure: the delayed draw term loan, which offers IG borrowers a significantly more attractive fee arrangement without compromising certainty of funding or terms.
Additionally, lenders are offering IG borrowers more flexibility around closing timing. Lenders are increasingly willing to align their financing closing conditions with the merger agreement’s timing mechanics and to waive certain fees in the event closing happens during an issuer’s blackout period. In response to regulatory uncertainty, lenders are also agreeing to allow borrowers to make what has become known as an “Applicable Margin Election” and keep their commitments in place beyond specified termination dates in return for payment of margin interest from the borrower. These developments, taken together, have led to products that better match the realities of modern M&A dealmaking.
High Yield (HY) Trends: Banks Flex Their Muscles
Private credit has proven time and again that it is a “first-string” player in the leveraged loan market. We have addressed private credit aplenty in our previous memos (including here and here). But in 2025, traditional banks made aggressive moves to take back the spotlight. In Q3 2025, syndicated loan issuance reached a record $404B—the busiest quarter on record—including substantial volume attributable to opportunistic refinancings, repricings and dividend recapitalizations and acquisition financing. One has to look no further on the acquisition front than to the $20B commitment led by JPMorgan for the $55B leveraged buyout of Electronic Arts, the largest single bank commitment of its kind. By the end of 2025, banks refinanced over $34B of loans previously held by private credit providers (an increase of ~18% from 2024) as borrowers sought the lower-cost capital available through syndication to institutional lenders. This shift from previous years was particularly evident in large-scale deals where the lower interest spreads of the syndicated loan market seemed to attract borrowers more than the bespoke, and often more expensive, terms of private credit.
How did this ongoing push and pull between the two financing sources impact borrowers? Amid intensifying competition and a more-favorable interest rate environment, sponsors pushed for increasingly aggressive terms. Some were relatively benign, like portability (i.e., allowing debt to remain outstanding, subject to certain conditions, even after a change of control of the borrower), while others went further—negative covenant baskets that increase as a borrower’s business grows but never shrink if the company’s business contracts; expanded rights to block certain institutions from becoming lenders; and provisions designed to prevent lenders from banding together in certain circumstances. Although lenders resisted most of these asks, their recurring appearance at the negotiating table underscored sponsors’ growing bargaining power.
Lightning Round: Other Developments to Monitor
Below are other significant developments in the financing markets that we are watching in the new year:
· AI Everywhere: Seeking to bolster their AI infrastructure, several tech giants, which have historically relied on balance sheet cash to fund their investments, tapped the debt markets to the tune of $100B. And it doesn’t appear that this influx of demand for debt capital will slow down anytime soon. Wall Street strategists forecast that AI-driven issuance could reach up to $300B in 2026. The surge in debt-financed AI capital expenditures is increasing correlation risk across the investment-grade index and, through higher net supply, could drive wider spreads.
· Rescission of Leveraged Lending Guidance: On December 5, 2025, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation rescinded the 2013 interagency leveraged‑lending guidance and 2014 FAQs, eliminating, most notably, the 6x debt-to-EBITDA “bright-line” threshold that subjected loans exceeding such threshold to additional regulatory scrutiny. This regulatory rollback is expected to bring a wave of leveraged lending back into the banking sector, further intensifying competition with nonbank private-credit providers. It is a welcome change for highly leveraged borrowers, who may benefit from increased credit availability and competition among potential financing sources.
· Post-Serta and Mitel: Following the Serta and Mitel decisions, borrowers and creditors alike have placed renewed emphasis on precise documentation to address uncertainty around liability management exercises (LME). From the new “extend-and-exchange” LME structure to the “inside out” strategy, the market is continuing to explore creative ways to navigate the post-Serta/Mitel world. It is more critical than ever for borrowers and lenders alike to prioritize precise legal drafting when originating credit facilities and to find creative solutions when addressing distress. As the market continues to innovate, more developments are sure to follow—stay tuned.
2025 was a dynamic year, and as M&A momentum carries into 2026, borrowers are well-positioned to benefit from competitive pricing, flexible structures and broad access to capital. Well-advised borrowers will be best positioned to seize these opportunities in this complex and continuously evolving market environment.
