Private Credit 2026

Navigating Opportunities and Challenges in the Global Private Credit Market

Looking back on 2025 and looking forward into 2026, the rapidly growing private credit market has emerged as a formidable force in the global financial landscape, offering a compelling alternative to traditional syndicated bank lending and other public market products including high-yield bonds. This Chambers 2026 Private Credit guide provides an overview of trends and developments in the private credit market in the most active jurisdictions, including the United States, the UK and beyond.

A Global Perspective on Private Credit

Private credit lending to public and private companies has grown exponentially over the last decade. The global private credit market now stands at approximately USD2 trillion – ten times its size in 2009 – with dry powder reaching record levels of USD450–550 billion. Projections from leading analysts suggest global private credit assets under management could approach USD3 trillion by 2028 (and some observers believing that it might have already reached USD3 trillion if dry powder is included). After slower initial development, market watchers are now predicting that Europe’s private credit growth rate may potentially outpace the continued growth of the United States, with European assets potentially growing by USD800–900 billion over the same period.

The market’s expansion is not confined to any single region but continues as a global phenomenon. In the United States, private credit is an established asset class and has become a staple of corporate finance, offering flexible and tailored solutions to borrowers. Traditional sponsors and corporate borrowers have also looked to private credit to finance a wider range of asset classes, from real estate and infrastructure to technology and healthcare. In infrastructure, private credit is being used to fund large-scale projects such as renewable energy developments and, increasingly, infrastructure related to artificial intelligence (AI), including data centres and power grid upgrades.

In Europe, the market expansion varies by country and has been one of the areas of opportunity for US asset managers expanding abroad, with some markets outperforming others with robust growth and growing private credit penetration. In emerging markets, private credit is beginning to play a pivotal role in bridging the financing gap for mid-sized enterprises. We see this global trend continuing as established asset managers seek increased opportunities in emerging markets and as the leading asset managers continue to exceed their fundraising targets.

Key Themes and Trends

The guide examines several themes and trends that have emerged as both causes and effects of evolving market conditions.

Market consolidation and strategic partnerships

The private credit market continues to evolve through a wave of consolidation, with larger firms acquiring smaller players to enhance their market presence and scale. Strategic partnerships between banks and private credit funds have also become increasingly common, allowing both parties to leverage their respective strengths. This “co-opetition” model enables banks to reduce their risk while maintaining client relationships and provides private credit funds with access to a broader range of investment opportunities. Looking further into 2026, market participants are cautiously optimistic, with a focus on discipline, governance, strong underwriting and better deal structures.

Regulatory developments

As the private credit market matures, it may face increased scrutiny from regulators even as public market options become more competitive. In the United States, the Office of the Comptroller of the Currency and FDIC issued a joint statement in December 2025 rescinding the 2013 Leveraged Lending Guidance. This could allow banks greater flexibility to underwrite risk and compete more directly with private credit across leverage levels. Additionally, new guidelines from the National Association of Insurance Commissioners that took effect on 1 January 2025 reclassified certain sections of insurers’ financial statements, providing better insight into their private credit activities and increasing transparency regarding “ratings inflation” concerns in privately rated placements. Against that changing competitive backdrop and as private credit continues to expand its LP base, there have been calls for closer regulatory scrutiny of private credit funds and its suitability for certain investors.

In the UK, the Bank of England announced in early December 2025 its intention to stress-test the private markets to reveal any risks and their interconnectedness with the broader UK financial system, amid concerns that the resilience of private markets to a severe downturn has not yet been tested, and Governor Andrew Bailey highlighted the need for continued vigilance. These regulatory developments underscore the case for private credit providers to enhance their compliance and reporting frameworks to mitigate potential risks.

Innovative financing structures and the rise of AI infrastructure

Private credit providers are continually innovating to meet the evolving needs of borrowers. The surge in AI-related investments has become a major theme, with private credit playing an increasingly crucial role in funding the upfront costs of purchasing graphics processing units (GPUs), building data centres and upgrading power grids. Increasing demand for private credit in 2026 is likely to be no different from 2025, and we expect that the pace of AI-related infrastructure spending will only accelerate. BlackRock estimates that AI investments through to 2030 will require significant upfront spending on computing, data centres and energy infrastructure. JPMorgan reports that US data centre-related bond issuances reached USD15.1 billion in 2025, and estimates that around USD150 billion will be needed in 2026–27 to convert short-term construction loans into long-term financing for nearly 20 gigawatts of data centre capacity. Private credit stands to benefit from that strong demand.

Portfolio challenges

Private credit has historically had low default rates even through multiple credit cycles, and the product has shown remarkable resilience. That said, private credit loans from the very active 2021 vintage are likely set to mature in 2028, encouraging early refinancing and, where required, restructuring, and we expect to see significant refinancing activity if those transactions are not paid off via exit events.

The immediate post-Covid vintage might present particular challenges, with leverage levels consistent with the high valuations of the time and significant borrower bargaining power. With those credits in mind, direct lenders are increasingly proactive about engaging with borrowers about potential problems and developing solutions before the problems materialise, including through proactive amendments, negotiating with sponsors for additional equity injections and managing liquidity through PIK flexibility.

Junior and hybrid capital

Junior and hybrid capital solutions provided by private credit, structured equity funds and private equity have emerged as a crucial financing tool for sponsor-backed and non-sponsored companies alike. These capital providers are increasingly offering junior and hybrid capital solutions that blend debt and equity elements, enabling sponsors to monetise assets effectively, de-lever debt capital structures, and provide more dry powder for acquisitions, while providing investors with downside-protected returns.

For the right issuers, the availability of non-cash pay instruments (which is a customary feature of junior and hybrid capital solutions) allows for greater flexibility to conserve cash as businesses ramp up, and remains an attractive option for some sponsors and creditors alike.

Continuation funds

Additionally, in a market that has seen subdued M&A levels, sponsors have been holding assets for longer periods, leading to a rise in the use of continuation funds. Direct lenders are increasingly supporting the financing of such vehicles, particularly in the middle market. Market participants expect limited partners to continue backing continuation funds when valuations are independently validated and general partner economics are clearly aligned. Direct lenders are also pitching pre-IPO junior, equity-like debt solutions to help sponsors de-lever prior to a listing, responding to expectations of an uptick in IPOs in 2026.

UK and European trends and developments

The UK and European private credit markets are experiencing their own set of trends. Pricing in European private credit has continued to tighten, with median spreads on senior and unitranche loans declining.

New regulations in Europe have widened the scope of assets in which individuals can invest, accelerating a drive towards retail and private wealth investors alongside open-ended funds. Insurance balance sheets and wealth investors are set to play a larger role in private credit fundraising, while strategies such as NAV financing, asset-backed lending and significant risk transfers (SRTs) are converging with the asset class.

Terms, covenants and documentation

The growth of private credit was driven by lenders acting as principal investors and negotiating for tighter terms, covenants and documentation, coupled with strong returns. As the market has evolved and matured, and competition intensified, these terms have been adjusting to reflect increased competition both from new entrants and from public market debt products. To close deals in 2025, private credit lenders evolved from just having the capacity to deploy large quantities of dry powder, and the best private credit lenders have focused on being able to deliver greater capabilities across a wider spectrum of deals and also marketed their ability to deliver certainty of terms and funding. Private credit agreements continue to feature bespoke terms tailored to the borrower’s specific needs and the lender’s risk appetite, but private credit providers are now able to provide greater flexibility on terms, metrics, covenants and PIK options.

Looking further into 2026, market participants expect increasing discipline, underwriting and diligence. The most sophisticated and established private credit providers are likely to continue to place greater emphasis on the quality of underwriting and documentation, with sole underwriters or tighter club deals remaining a focus and preference over larger, more aggressive deals that resemble broadly syndicated transactions.

Conclusion

2025 showed that private credit is resilient, defying some gloomy predictions and sensationalist headlines, but the private credit market endured and continued to grow.

If 2026 proceeds as predicted, with an increase in M&A activity, strong IPO markets, and continued strong refinancing and recapitalisation activity, we expect to see private credit continue to deliver steady returns for investors and retain a low default rate.

We hope that this 2026 edition of the Private Credit guide can help market participants better navigate the opportunities and challenges that lie ahead.