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In the News

• The broadly syndicated loan market held steady in September, according to Covenant Review. Pricing on new loans barely moved even though supply outpaced demand by $16.5 billion, a gap opened by a surge in M&A lending to a 56-month high of $31.2 billion. Single B borrowers cleared at S+337 and double B at S+206, both nearly identical to August. Only the weakest tier moved: B3/B- credits widened to S+375 from a seven-month low of S+344. Arrangers cut pricing on 26 deals during syndication and raised it on five, as compared to August’s 11 cuts and no increases. Repricing activity rebounded to $25.9 billion from $6.2 billion, mostly due to activity in the first two weeks of September. A supply imbalance of that size would normally push borrowing costs up. That it moved only the weakest tier shows how much money is still chasing well-rated paper. October has opened busily. Octus counted at least $8 billion of leveraged loans and high-yield bonds launching across 11 deals in the first full week of the month, $5.7 billion of it new money across seven transactions.
• The Federal Open Market Committee (the “Committee”) raised the federal funds target range a quarter point to 3.75% – 4.00% on September 16, the first increase since 2023. The September projections put the median expected funds rate at 4.1% for both 2026 and 2027 — roughly one further quarter-point increase this year — then a hold. In June, those medians were 3.8% and 3.6%, so the Committee moved its 2027 expectation up half a point in a single quarter. The path matters for behavior. While cuts were expected, a borrower facing a 2028 maturity could reasonably decide to wait for a better rate based on June projections; a path with rates that plateau or rise reduces the attractiveness of that option.
• Amend-and-extend is the quarter’s dominant borrower story. Volume surged to $19.9 billion in September from $5.2 billion in August across 20 transactions, according to PitchBook LCD, taking the year-to-date volume to $150.4 billion from $140.4 billion over the first nine months of 2025. Refinancing a term loan outright now costs about 6.9% a year, cheaper than 2025’s 7.4% but more than in any year from 2010 to 2022, according to PitchBook LCD; extending avoids that reset. Volume due through 2027 narrowed to $18.9 billion from $56 billion at the end of 2025 while the amount falling due in 2029 and beyond has grown by $204 billion. Covenant Review’s third-quarter sample of twelve discrete amend-to-extends divided into two distinct categories depending on whether the market demanded wider spreads on the loan post-A&E. Four cleared at a spread at or below the original loan: all-in pricing fell to S+290 from S+323, the free-and-clear incremental basket grew to 1.31x pro forma EBITDA from 1.20x, and documentation loosened slightly, to 4.00 from 3.91. The other eight paid more, at S+502 against S+357, with the free-and-clear incremental basket cut to 0.75x from 1.18x and documentation tightening to 3.35 from 4.16; seven of those eight paid 75 basis points or more and moved furthest on every measure. Pricing, capacity, and covenant quality moved together rather than against each other. Software and technology borrowers saw the sharpest documentary tightening.
• One signal of strain in private credit is not the default rate, but the re-plumbing of how interest gets paid. A PitchBook LCD analysis of certain large exchange-traded business development companies and other investors found that loans amended or toggled from cash-pay to payment-in-kind (PIK) interest outnumbered new PIK-from-issuance loans by almost six to one in the second quarter — 376 conversions against 64 new PIK loans. “Amend-to-PIK,” used to conserve cash and avert default, has displaced lender appetite for growth-oriented PIK at origination. The headline numbers look calm — the total PIK balance rose just 1.4% in the quarter, to $18.9 billion — but the lenders holding those loans have been quietly marking them down and now carry them at an average of 92 cents on the dollar against almost 94 at the start of the year. Taken with those markdowns, the rising exercise of PIK toggles can be interpreted less as cash-flow flexibility than as a further indication of distress in the private credit market.
• That strain seems to be concentrated by sector. PitchBook LCD reports that software accounted for 12% of private equity-backed direct lending deals by count so far in 2026, down from 16% last year. The syndicated market tells a different story: Software was September’s strongest recovery there, the sub-index gaining 0.91% and its year-to-date loss narrowing to 1.72% from 6.3% at the end of June. In private credit, though, lenders already carrying heavy software books have grown selective: The deals clearing are largely refinancings and extensions by incumbent lenders, and bringing a new lender to a legacy software credit now generally takes lower leverage, higher pricing, or a credible account of how the business gains from AI rather than loses to it. Octus reports that where software borrowers cannot extend, lenders are increasingly pushing sponsors into a sale rather than taking the keys themselves.
• On documentation, Covenant Review’s third-quarter benchmarks show terms still drifting toward borrowers. On its 1-to-5 Documentation Score, where 5 is the most borrower-friendly, the all-loan average moved to 3.96 in the third quarter, up from 3.69 in the second quarter — the most aggressive reading since January 2025 — and to 4.16, up from 4.01 among private equity-driven loans. Yield protection moved sharply in sponsors’ favor, with MFN cushions of 75 basis points or more clearing in 50% of deals against 17% in the second quarter, which Covenant Review attributes largely to an increase in cross-border executions. Octus found that 15 of the 20 aggressive terms it tracks appeared more often in the third quarter than across the preceding four quarters, with carve-outs permitting earlier maturing debt at 74% of deals against 62%, 200% contribution debt at 45% against 37%, and “pick-your-poison” baskets allowing restricted payment capacity to be reallocated to debt at 53% against 47%. The sharpest move is in pro rata protection. Aggressive non-pro-rata purchase exceptions — which let a borrower repurchase loans from selected lenders without offering the same terms to the rest — reached 53% of deals from 43%, a trend Octus ties to sponsors looking for routes to non-pro-rata liability management since the December 2024 Serta decision closed off the open-market purchase. Few provisions moved the other way, but one that did was change-of-control portability, which fell to 8% from 11%.

Goodwin Insights – AI and Management Incentive Plans

Goodwin partners Carl Bradshaw and Anna Humphrey, joined by panelists from Ledgy, PwC and Jamieson Corporate Finance, have published five takeaways on what AI adoption is doing to management incentive plans. Their five key takeaways are: (1) the talent war has entered a new phase, but MIP adaptation is not a given; (2) measurement of AI adoption does not automatically mean returns; (3) early attempts at alignment or incorporation of an AI component in plans are modest and varied; (4) data, diligence, and plan management also advance with AI; and (5) there are other forces at work.

In Case You Missed It — Check out these recent Goodwin publications: Life Sciences Antitrust Quarterly Update Q3 2026; SEC Issues Section 21(a) Report on Investor Coalitions, “Group” Formation, and Schedule 13G Eligibility; Patents or Trade Secrets? What Boards and CEOs Should Know in the Age of AI; The New Era of Data-Driven Fraud Enforcement; Every Company Needs an AI Use Policy; Eight Things About Fintech-Bank Partnership Term Sheets.

For inquiries regarding Goodwin’s Debt Download or our Debt Finance practice, please contact Dylan S. Brown and Reid Bagwell.

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