Key Insights from the LSTA and DealCatalyst 4th Annual Private Credit Industry Conference on Direct Lending

On May 12 and 13 2025, the Loan Syndications and Trading Associations held its fourth annual private credit industry conference in Nashville, Tennessee—the speakers of which included industry professionals from direct lending funds, investment banks, LPs, rating agencies and law firms.

• Cautious Optimism. 2025 was largely expected to be the year that M&A activity came roaring back, with some predicting M&A levels to approach the record setting levels seen in 2021. However, uncertainty in the global economy following "Liberation Day" and the shift in US trade policy by the new presidential administration have grinded global M&A activity to a halt, leaving many private credit funds on the sidelines waiting to put their money to work on new buyout financings. Despite this backdrop, recent trade deals and the rollback of tariffs by the US government have contributed to widespread optimism that global markets will stabilize, and we will see an uptick in M&A activity in the second half of 2025 with a flurry of exits.
• Increased Competition. Over the past few years, credit providers have raised record amounts for new funds, and new entrants have continued to join the market, often through the consolidation of pure private credit firms with larger institutional entities. Combined with a subdued market for buyout loans, this has resulted in a situation where the supply for private credit financings significantly exceeds demand, compelling parties to innovate and remain flexible. This may create pressure on private credit firms to offer more favorable pricing and/or covenants to win deals, and lenders are generally wary of a "race to the bottom" eroding their negotiating positions on key terms. This competitive landscape has contributed to the increasing convergence of terms in the direct and syndicated markets.
• Documentation Considerations. Despite the competitive dynamics which have been playing in borrowers' favor when negotiating pricing and covenants, lenders are generally continuing to "hold the line" and negotiate for strong liability management protection provisions, specifically named provisions such as J. Crew, Serta, Chewy, At-Home, Pluralsight and Envision. This is the case in deals ranging from the lower middle market to the top-of-the-market, in large-cap sponsor deals.

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