Direct lending volume topped output for liquid credit in the third quarter for the first time since KBRA DLD started tracking this data in January 2021. New issuance for US sponsored direct lending finished at $39 billion, nudging ahead of the $38 billion recorded for high yield and institutional leveraged term loans combined, per Pitchbook LCD. Keep in mind that KBRA DLD captures only a slice of this opaque market, and the actual new-issue tally is far higher.
What’s more, direct lending beat liquid credit despite falling 33% from the second quarter’s $57.8 billion, as tracked by KBRA DLD. The drop is significant but relatively mild compared to prior quarters and the drought across the broadly syndicated and high yield markets. In direct lending, third-quarter volume was ahead of the $38 billion tracked in the same period a year ago, and the decline was only about half of the 60% rollback in the first quarter following an unusual surge in late 2021 on pent up demand post-Covid.
By contrast, high yield struggled to post $16.9 billion in new issuance, its second worst quarter ever, per Pitchbook LCD, while syndicated loans plunged 62%, to $21.4 billion, the worst quarter since the Great Credit Crisis of ‘09, and down 86% from the third quarter last year.
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