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William Blair notes high expectations for the leveraged finance market heading into 2026.

The leveraged finance market is entering 2026 with high expectations following a strong period of issuance in 2025. However, the market is currently experiencing a period of increased lender scrutiny regarding the risks of artificial intelligence disruption. This scrutiny is widening credit spreads and delaying debt deals, particularly for software companies and AI-related firms. UBS has modeled scenarios where AI disruption could cause default rates to spike as high as 13%. This caution has already impacted public equity prices, with major private credit managers like Blue Owl Capital, Ares Management, and Blackstone seeing significant declines. Despite the caution, several companies are testing the market. EnergySolutions and FDH Aero priced buyout deals this week, while software-related refinancings for Imprivata and Ancestry.com are also being executed. In the data center space, Galaxy Digital is pricing senior secured notes for a project leased to CoreWeave, an AI infrastructure company that is also seeking to debt to fund GPU installations. These developments indicate that while the easy money era may be over, investors are beginning to identify which companies are benefiting from AI and which are facing headwinds.

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