The surprise of 2025’s post-Liberation Day risk-on dynamic across markets has established a pattern we expect to continue well into next year. As we discussed last week, the implementation of rate cuts, the slowing of inflation and the persistence of economic growth has supported dealmakers and their financing partners. 

Nevertheless, attention is focused on transactions closed during the highest rate period from 2022 – 2024. It had been forewarned that defaults should be expected emerging from that time. And so now every story of a troubled deal triggers warnings of a coming credit crisis. 

At a well-attended Investment & Pensions Europe webinar we were asked whether these failures are indicative of private credit deterioration. Are they changing how we evaluate companies? Bank-led deals and private deals in challenging sectors or with higher leverage are among those showing signs of stress. Direct lenders in the middle market are mostly dealing with “idiosyncratic” situations, with little evidence of portfolio-wide problems.