Competition moved unitranche spreads 25 bps lower in December to an average of L+540, a monthly low in 2021, despite the stabilizing effect heavy volume in the fourth quarter had on pricing for smaller borrowers and non-unitranche LBO financing. The decline dropped all-in yields to 6.7%, also a monthly low last year.
Return requirements should keep pricing from slipping much further, especially as looming interest rate hikes will bump funding costs.
DLD’s pool of unitranche loans consistently averaged about $50 million in EBITDA last year, the larger end of the middle market. Like a sliding scale, the private market’s reaction to movement in liquid credit tends to decline in tandem with borrower size, yet competition is affecting that convention. Today’s direct lending market is more crowded than before and grown exponentially since 2015.
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PE exit activity
Exit value fell to $102.6 billion in the second quarter—down 46.3% from the prior quarter and 7.4% YoY—while exit count dropped to 353, a 14.1% quarterly decline and a 5.4% rise against Q2 2025.
US BSL and MM CLO Performance Held Stable in July 2026
In July 2026, portfolio credit quality in reinvesting Fitch-rated U.S. BSL CLOs remained broadly stable from June. Net portfolio losses held at 0.5%. The Fitch weighted average rating factor also held at 23.1. The Fitch weighted average recovery rate declined slightly by 0.1%, while the weighted average spread fell by 0.01%.
