KBRA says U.S. structured credit issuance regains momentum amid macro uncertainty

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U.S. structured credit regains momentum

Highlights

U.S. broadly syndicated and middle market CLO issuance tops $111 billion year-to-date August 2026, nearly matching second quarter totals but remains 20% below last year.
European broadly syndicated loan CLO issuance approaches EUR40 billion, while middle market CLO volume exceeds EUR1 billion for the first time as private credit demand grows.
KBRA records 380 rating actions (15 upgrades, one downgrade) across 86 transactions through September 2026, citing strong demand, stable credit, and absorbable default risk despite macro headwinds.

Issuance trends through August 2026

As reported by Kroll Bond Rating Agency, U.S. collateralized loan obligation issuance regains momentum over the summer as liability spreads remain relatively tight and investor demand stays firm despite a challenging macroeconomic backdrop.

Volumes in the first two months of the third quarter nearly surpass the total recorded in the second quarter, helping lift year-to-date new issuance in U.S. broadly syndicated loan and middle market CLOs to more than $111 billion as of August 2026. Even so, total issuance remains about 20% below the pace seen a year earlier, mainly because of weak collateral formation and more difficult arbitrage conditions for broadly syndicated loan CLOs.

In middle market and private credit CLOs, year-to-date 2026 activity keeps pace with the prior year despite modest widening in middle market CLO AAA spreads. In Europe, broadly syndicated loan issuance largely matches 2025 levels at nearly EUR40 billion, while European middle market CLO volume surpasses EUR1 billion for the first time, signaling continued development in the region's private credit CLO market.

Credit conditions and rating stability

For the final months of 2026, KBRA expects demand for CLO liabilities to remain strong, supported by recent and potential further base rate hikes. At the same time, elevated rates continue to pressure highly levered corporate borrowers, even though broader credit performance remains resilient and deterioration has not become widespread.

KBRA says geopolitical tensions, concerns tied to artificial intelligence, and continuing credit uncertainty are likely to further weaken an already soft mergers and acquisitions environment. That combination is expected to limit new loan and CLO supply while keeping spreads range-bound.

Through year-to-date September 2026, KBRA issues ratings for 54 structured credit transactions and records 380 rating actions across 86 transactions, with most actions being affirmations alongside 15 upgrades and one downgrade. The agency says its surveillance activity reflects continued stability, with default indicators in its middle market and broadly syndicated loan portfolios remaining broadly absorbable within KBRA-rated debt structures.

Our earlier coverage of KBRA’s rating withdrawals in mortgage-backed securities explained that dozens of RMBS and CMBS/RMBS classes lost active ratings after their balances were fully paid down to zero. KBRA’s review of remittance reports showed no accumulated interest shortfalls or principal writedowns, indicating an administrative wind-down rather than collateral deterioration.

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