FICC Focus Credit Crunch: Leveraged Loan, Private Credit, CLO Outlook 2026
Jan 19, 2026
In this discussion, Paul Mehta, Head of Leveraged Credit at Aberdeen Investments, shares his expertise on the evolving landscape of leveraged loans and private credit. He highlights how private credit is providing new financing alternatives, alongside the significant role of CLOs in the market. Paul discusses projections for loan returns in 2026, comparing them to high-yield bonds, and delves into the implications of private credit on public market defaults. Listeners can gain insights into market dynamics and investment opportunities ahead.
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Private Credit Siphons Risk From Public Markets
- Private credit is removing riskier issuers from public markets, keeping public default rates unusually low.
- That shifts credit stress into less-observed private channels and elevates private‑credit default visibility concerns.
Private Credit Commands Material Yield Premiums
- Issuers pay material premia to go private: roughly +200bps for B‑minus and +300–350bps for CCCs.
- Private credit offers more flexibility and access but demands materially higher all‑in yields for weaker credits.
European Private Credit Still Nascent
- European private credit is much smaller than the US (roughly 10–15x gap) and has room to grow.
- Regulators are increasingly demanding more data as private credit becomes systemically important.