After a sharp tariff-induced dip in loan issuance, markets in the US and Europe regained confidence and stabilized by the end of the first half of the year
US and European leveraged loan markets had a bumpy ride during the first half of the year but were able to steady themselves after a tariff-induced shock in April.
Swings in US trade policy precipitated a year-on-year decline in US leveraged loan issuance, which totaled US$865.5 billion in H1 2025, down 8.3% compared to the US$943.8 billion logged during the same period in 2024.
Overall Issuance by value Q1 2024 – Q2 2025
Instrument type: Leveraged loans Use of proceeds: All
Location: USA Sectors: All Sectors
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However, that dip in activity was predominantly due to an unusually weak April, as credit markets almost completely shuttered to digest the sweeping changes to the US tariff policy announced at the start of the second quarter. According to Debtwire, US leveraged loan issuance totaled just US$88.6 billion in April, down by more than 30% from the US$128.3 billion issued in March.
But markets settled following the April shock. Issuance improved considerably, reaching US$149.6 billion in May and US$179.4 billion in June, putting the US leveraged loan ecosystem on firmer footing heading into the second half of the year.
European leveraged loan activity also dipped in April, but, due to a stout opening quarter and a busy June, overall issuance in H1 2025 registered a marginal year-on-year gain to US$196.25 billion from US$195.99 billion in H1 2024.
Meanwhile, loan markets in APAC (excl. Japan) held up well amid market uncertainty through the early part of 2025. Issuance of leveraged and non-leveraged loans was up by 7.5% year-on-year, rising to US$141.2 billion from US$131.4 billion in H1 2024. After a slow first quarter, issuance accelerated in the second quarter to put the market on an upward trajectory.
There has also been a noteworthy increase in private equity (PE) sponsor-backed financing activity in APAC (excl. Japan), as firms look for ways to return money to clients. The total value of loans raised where proceeds will be allotted to dividend payouts rose by 18% year-on-year in APAC during the first half of the year, according to Bloomberg.
US market looks to make up ground
Moving into the second half of the year, the priority for US loan market investors and issuers will be to continue building on the post-April rally and make up for the ground lost at the start of the second quarter.
In secondary US loan markets, loan prices have yet to recover to Q1 levels. Bid prices for loans fell to 93% of par during the first week of April, according to Debtwire. Although bids did improve to 95% in June, pricing is still softer than the 95.9% reached in February.
A sustained recovery in secondary market loan prices in the second half of the year would help support the primary markets, which, despite the year-on-year dip in issuance recorded in the US, remain in relatively good health. In particular, robust refinancing activity in recent years has pushed back maturity walls. Only US$505 billion of the total US loan debt is maturing prior to 2028, and institutional loan refinancings in H1 2025 reached US$345.7 billion, representing 76.5% of US institutional issuance during that period.
June proved to be especially strong for refinancing, favorably positioning the market for the rest of the year. The total value of institutional loan refinancing reached US$42.2 billion in June, more than triple the US$14 billion recorded in May and a welcome rebound from the US$3.5 billion logged in April.
The biggest obstacle to an increase in issuance will not be the supply of capital, but limited opportunities for lenders and investors to deploy available capital. Tariff uncertainty has inhibited the much-anticipated revival of US M&A, which lenders had hoped would fill leveraged loan pipelines.
After a spike in activity in Q1, US deal volumes fell to a multi-year low in Q2. Moreover, following an encouraging opening quarter, the aggregate value of private equity (PE) buyouts announced in the US dropped by 16.5% in the second quarter, as dealmakers put transactions on hold to assess the impact of tariff changes on target company earnings and valuations. A sustained recovery in US M&A activity would be a key driver of increased loan issuance in the second half of the year.
New money deals and dividend recaps boost Europe
In Europe, investors and banks are also hoping for a jump in M&A activity to provide opportunities to deploy capital and boost new-money issuance. Western European PE buyout deal value has fallen for two consecutive quarters, and Debtwire data show that new money issuance in Europe accounted for less than 15% of total issuance in June.
However, there are encouraging signs of more M&A and buyout-backed opportunities coming to market. In June, Lynxeo, Skechers and Kereis all priced new loans backing their buyouts, while IVIRMA and Climater successfully secured loans to back acquisitions.
European markets have also seen a surge in dividend recaps (where debt is raised to pay dividends to investors), as PE firms explore other routes to liquidity in a still-flat M&A market. According to Debtwire, Etraveli, Ahlsell, Datasite and Ropo Group raised a combined €1.17 billion in debt, portions of which were set aside for distributions to investors. In February, power-equipment maker Trench Group, a portfolio company of Triton Partners, raised a €380 million leveraged loan to refinance existing debt. In June, another Triton company, Dutch multi-utility service provider Hanab, priced a €605 million loan, with the proceeds being used to refinance existing debt and fund a shareholder distribution.
Similar deals are forecast for the months ahead, including Froneri, which is in the market with a €3.9 billion bond and loan package to back a dividend recap.
Hong Kong and Singapore propel APAC lending rebound
Trade-related uncertainty has also weighed heavily on Asian markets, but the region posted strong issuance figures in Q2, with several large M&A deals boosting loan market activity. For example, China’s Zijin Mining Group, a copper and gold miner, secured a US$1.1 billion five-year loan facility to finance its acquisition of lithium miner Zangge.
More broadly, lending markets in mainland China and Hong Kong recorded a noticeable upturn in activity. Among the largest was a multibillion-dollar loan refinancing deal struck by New World Development at the end of June. Following many months of negotiations with lenders, the distressed Hong Kong property developer was able to close the US$11.2 billion deal, the largest ever loan of its type in the territory.
Lending markets in Southeast Asia also enjoyed a strong first half of the year. According to Bloomberg, loan activity among Asean borrowers in H1 was up by 25.3% compared to the same period in 2024, reaching US$42.9 billion. The biggest spotlight fell on Singapore, where in February luxury hotel and casino Marina Bay Sands secured a US$9 billion syndicated multi-tranche seven-year loan, according to Debtwire. This deal is the largest financing announced in Singapore’s history, with the proceeds going toward debt refinancing and resort expansion.
Following a precarious start to the year, loan markets appear to have found a foothold. Although M&A softness and tariff-related volatility remain, a stronger close in June augurs well for a positive second half of the year and more sustained deal flow.
