October 18, 2023 - Recent headlines have largely centered on the growth in the size of jumbo transactions (deals $1 billion or larger) financed by private credit in the past several years. Yet data also shows that this trend is supported by a growing number of jumbo transactions that has been placed in the private credit market relative to the BSL market. Moreover, private credit jumbo deal volume has been less volatile than BSL jumbo deal volume.

According to data from LevFin Insights, private credit jumbo deal count increased 23% year-over-year in 2022 to 32, while BSL jumbo deal count fell 69% to 73 and is down about 75% from its six-year peak of 289 in 2017. (LFI tracks no jumbo deals in the private credit market in 2017.) On a volume basis in 2022, private credit jumbo transactions jumped by 52% to $73 billion and BSL jumbo transactions fell by 67% to $144 billion.    

However, year to date though October 13, BSL jumbo deal count and volume have outpaced their 2022 total, with activity weighted towards the third quarter when the market showed sequential improvement in overall volume. Private credit jumbo deal count and volume are tracking at about half of its 2022 total as the BSL market has reopened. That said, private credit’s YTD volume includes the market’s largest transaction to date – a $6.2 billion refinancing for insurance products distributor Integrity Marketing Group. By comparison, there have been just seven deals sized at $6 billion or more in the BSL market since 2017, the data period reviewed – two of which are repricings of deals placed during the same period.       

As of September, aggregate jumbo financings accounted for by private credit stands at $170 billion, according to the LFI data. That’s up from zero in 2017. While private credit’s jumbo deal growth is very impressive, it is still outpaced by aggregate BSL jumbo financings over the same period, which total around $2 trillion.

Not surprisingly, given weakness in dealmaking activity against the backdrop of rising interest rates, YTD private credit jumbo deal proceeds funding mergers and acquisitions, including leveraged buyouts and carve-outs, are down from 2022 overall. YTD, mergers and acquisitions represent about 44% of proceeds (47% of deal count), compared to 74% in all of 2022 (72% of deal count). Meanwhile, refinancings also represent about 44% of jumbo deal proceeds in the year-to-date (33% of deal count), compared to just 3% last year (3% of deal count).

In the BSL market, the share of proceeds backing mergers and acquisitions has fallen from 58% in 2022 (53% of deal count) to 16% YTD (17% of deal count), while proceeds backing refinancings have increased from 21% in 2022 (25% of deal count) to 55% YTD (57% of deal count).

Borrowers sponsored by Thoma Bravo and Harvest Partners have accounted for the largest number of private credit jumbo transactions since 2016, with 11 and seven deals, or 14% and 9% of total deal count, respectively, according to the LFI data.

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