Leveraged Finance 4Q24 Review

Trends and Insights for 2024

Leveraged Finance plays a crucial role in driving capital markets, particularly in M&A, private credit and refinancing activities. As businesses navigate changing economic conditions, the demand for high-yield loans continues to shape financing trends globally. In 2024, leverage loan activity saw significant fluctuations, with lending volumes reaching over $200 billion in the first nine months—a 256% increase compared to the same period in 2023.

Key Market Trends

Despite slowdown in traditional bank lending, private credit continues to dominate, providing borrowers with more flexible financing solutions. New money issuance accounted for approximately 70% of activity in 3Q 2024, reflecting the ongoing demand for acquisition financing. Meanwhile, institutional refinancing dropped by 69%, highlighting a shift in borrower priorities toward growth and expansion.

Investor appetite for leveraged loans remains strong, driven by attractive yields and limited loan supply. However, pricing dynamics have shifted, with average margins on first-lien loans dropping in both the US and Europe to the lowest levels in two years. In contrast, gross leverage multiples have increased, indicating that borrowers are taking on more debt to meet growth objectives.

Outlook for Leveraged Finance in 2025

Looking ahead, the leveraged finance market is expected to remain active, supported by steady economic growth and favorable interest rate environments. The Federal Reserve’s anticipated rate cuts in 2025 will likely lower borrowing costs, providing relief to leveraged loan issuers. Additionally, private credit is expected to expand further, influencing deal structures and driving competition in the lending space.