2026 credit market outlook: This side of paradise

Carlyle

Jason Thomas, Mark Jenkins

Research

10 Pages

Carlyle argues that Q1’s funding liquidity shock may signal a turn in the credit cycle, not a crisis. BDC discounts, software loan stress, and weaker fund flows could shift bargaining power back toward creditors.

Key Takeaways

BDC Discounts Widened: Listed BDCs traded near 78 cents on reported assets at Q1 end, down from roughly par one year ago.
Software Stress Rose: Distressed software loans increased 5x, from $8 billion to more than $40 billion.
Credit Risk Broadens: Software is 13% of syndicated loans but 37% of loans trading below 80 cents on the dollar.
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