HPS CEO Kapnick identifies a structural shift in private credit markets, driven by rising corporate leverage and demand for higher yields, with implications for leveraged buyouts and high-yield debt. The trend is expected to accelerate through 2026 and beyond.
- Private credit commitments exceed $1.2 trillion, up 34% since 2023
- HPS deployed $1.9 billion in new private credit deals in Q4 2025
- Average leverage in private credit portfolios is 5.7x EBITDA (up from 4.9x in 2023)
- US10Y yield at 4.8%, HYG spreads at 420 bps over Treasuries
- Private credit now accounts for 19% of total corporate debt (up from 12% in 2021)
- Correlation between CL=F and private credit spreads is increasing
HPS CEO Kapnick has flagged a pivotal inflection point in the private credit landscape, citing a surge in corporate borrowing outside traditional bank lending channels. He notes that over $1.2 trillion in private credit commitments are now active across U.S. and European corporates, a 34% increase since 2023, as companies seek flexible financing amid tightening bank lending standards. This shift is particularly pronounced in industrial and consumer sectors, where firms are leveraging private debt to fund expansions, digital transformation, and M&A activity. The growth is underpinned by a persistent yield gap: the 10-year U.S. Treasury yield (US10Y) has stabilized near 4.8%, while high-yield corporate bonds (HYG) continue to offer spreads of 420 basis points over Treasuries. This environment is attracting institutional capital seeking returns above inflation, with HPS alone deploying $1.9 billion in new private credit deals in Q4 2025. Kapnick emphasized that the next wave will focus on specialty sectors—industrial automation, mid-market healthcare, and consumer logistics—where predictable cash flows and asset-backed collateral support risk mitigation. Market dynamics are adjusting accordingly. The crude oil futures contract (CL=F) has seen increased correlation with private credit spreads, reflecting heightened sensitivity to energy prices in industrial borrowers. As corporate leverage ratios in private credit portfolios climbed to 5.7x EBITDA on average—up from 4.9x in 2023—Kapnick cautioned that credit selection will become critical. Firms with strong cash flow visibility and defensive business models are now commanding the majority of new capital, while those in cyclical sectors face tighter terms or reduced access. The broader impact is reshaping capital allocation across financials and equities. Private credit's share of total corporate debt has now reached 19%, up from 12% in 2021, reducing reliance on public bond markets. This evolution is expected to influence M&A activity, financing costs, and credit spreads across both public and private markets through 2026.