Post by Taylor Wright

Geopolitical tension, AI disruption, and renewed inflation concerns are all feeding into how selective investors are in credit markets, and how deals are getting done.   From spending time with clients, investors and sponsors, a few consistent points are coming across:   🔹 Demand is concentrating in higher-quality credit. This is reinforcing a “have” and “have-not” divide, with stronger, well-rated borrowers seeing deeper demand, while others are finding execution more challenging than even a few months ago.   🔹 Bonds are taking a larger role in execution. With loan markets more exposed to software and more dependent on CLO demand, bonds are playing a larger role on the capital structure, particularly for larger, more complex transactions. Even sponsors are more open to bonds where historically they preferred loans.   🔹 Private credit market is getting harder to read. While it remains an important source of capital, pricing is wider, ticket sizes are coming down, and underwriting appetite is less consistent than it was. The illiquidity of this market is also becoming a concern in this context.   🔹 Software is being re-underwritten. Investors are still reassessing how resilient software business models are in the context of AI disruption, and the market isn’t yet clearly distinguishing between those that will hold up and those that may not.   Overall, execution is still getting done but it’s with a higher bar, tighter pricing discipline, and greater scrutiny on how credit is positioned and structured. Execution quality in this environment is paramount.