Software loses its throne in the leveraged loan market

Marina Lukatsky

Fri, June 5, 2026 astatine 10:43 AM CDT 6 min read

Software’s two-decade tally atop the leveraged lending marketplace whitethorn beryllium over, astatine slightest for now.

Just 9% of each loans issued successful the US broadly syndicated indebtedness marketplace this twelvemonth (excluding repricings) person travel from bundle companies, the lowest stock since 2013 and astir fractional the 2025 level. The pullback is adjacent much striking wrong the PE-backed universe, wherever software’s stock has collapsed to 9%, from 21% successful 2025 and a 24% highest successful 2020, erstwhile the assemblage was the undisputed darling of the Covid-era woody boom.

“This is simply a marketplace of haves and have-nots, and bundle is among the have-nots,” says Engin Okaya, managing manager astatine PGIM Credit. “Right now, you’re either getting truly bully execution fixed the magnitude of adust pulverization retired there, or, if you person a much analyzable business, oregon thing that has a diagnostic astir it that the marketplace doesn’t like, those deals are having a hard clip getting done.”

The LBO marketplace tells the astir compelling communicative here. Software deals peaked astatine 34.5% of each LBO-related financing successful the US broadly syndicated indebtedness marketplace past year, a testament to PE’s long-held condemnation that recurring revenue, precocious margins, and scalability marque bundle the perfect buyout candidate. With bundle companies nether menace of disintermediation from AI, however, that stock has since fallen to 17.5%, a level not seen successful a decade.

“The magnitude of superior disposable to deploy successful exertion transactions has decreased. At the aforesaid time, determination hasn’t been a large woody of M&A successful the space, and the incremental financing dollar that was disposable has mostly evaporated,” says Milwood Hobbs Jr., lawman CIO of Oaktree’s strategical recognition platform. “As a result, we haven’t seen galore buyouts. Private equity firms are being selective astir wherever they deploy superior successful software, and financing conditions are apt to stay challenged.”

Whether this is simply a intermission oregon the opening of a much structural shift, driven by valuation resets, higher-for-longer rates, oregon a broadening rotation into sectors similar healthcare, remains a large question for the leveraged indebtedness marketplace heading into the 2nd fractional of 2026.

Healthcare claimed the apical spot successful organization indebtedness issuance for the archetypal clip since 2015, accounting for a grounds 14% of measurement truthful acold successful 2026. The assemblage has agelong been a fixture adjacent the apical of the rankings, but spent overmuch of the past decennary overshadowed by software. In implicit terms, Healthcare borrowers raised $25 cardinal from the broadly syndicated marketplace this year, though the fig is heavy concentrated: 2 January mega-deals — the $7.25 cardinal word indebtedness backing the Hologic buyout and the $4.4 cardinal installation supporting the Ensemble Health Partners dividend recapitalization — accounted for astir fractional of that total. However, the signifier holds for woody number arsenic well. Software accounted for conscionable 7.4% of each transactions successful the broadly syndicated marketplace this year, excluding repricings, which bring nary caller wealth to the market. That’s astir fractional the 2025 stock and the 10-year average. Healthcare, meanwhile, roseate to 8.8%, 2nd lone to nonrecreational & concern services, gaining crushed from some its 2025 level and its semipermanent average.