A sharp escalation in US trade tensions has sent shockwaves through global credit markets, bringing leveraged buyout financing and corporate debt issuance to a standstill — a move that is already disrupting PE dealmaking and refinancing activity, according to a report by Bloomberg.
In a stark example of the market dislocation, a $1.1bn leveraged loan backing HIG Capital’s acquisition of Converge Technology Solutions Corp has been shelved, according to sources familiar with the matter. The transaction is among several private capital-linked financings paused amid surging volatility triggered by President Donald Trump’s sweeping tariffs announced last week.
Elsewhere, Brookfield has delayed a $2.4bn commercial mortgage-backed securities (CMBS) refinancing package tied to a Hawaiian retail and office property, citing market turbulence. It comes as credit spreads widen at a pace not seen since the early days of the pandemic and investor appetite for new debt issuance dries up.
Notably, no new US investment-grade bonds have priced since Wednesday morning — just prior to the White House’s announcement. Several companies have held investor calls without bringing transactions to market, underscoring how pervasive the freeze has become. Riskier high-yield and leveraged loan deals are being postponed or pulled outright.
“Credit volatility is back,” wrote Deutsche Bank strategists led by Steve Caprio. “Policy uncertainty, erratic tariff decisions, rising inflation, and eroding investor confidence are all contributing to heightened credit risk.”
The dislocation has particularly serious implications for private equity managers relying on the leveraged finance markets to close buyouts, fund add-on acquisitions, or refinance portfolio company debt. With deal financing now in limbo, sponsors are facing delays and potential repricing across the board.
At hedge fund Saba Capital, founder Boaz Weinstein warned that the credit market selloff could intensify, potentially triggering a wave of bankruptcies if capital remains constrained. “The avalanche has just begun,” he said.
Risk premiums on high-yield US corporate bonds have jumped to their highest levels since November 2023, while investment-grade spreads now sit at levels not seen since last summer. Investors and credit analysts alike are dialling back expectations for a near-term recovery.
“It’s going to be hard for credit spreads to return to their previous tights,” said Matt Brill, Head of North America Investment-Grade Credit at Invesco. “There’s too much uncertainty priced into the market.”
UBS strategists are now forecasting spreads that could rival early-pandemic levels, while Bank of America has widened its investment-grade spread forecast for the remainder of 2025.
European credit markets are following suit with a gauge of European junk bond risk surging to a five-month high, led by sharp selloffs in autos, chemicals, and real estate — sectors with heavy exposure to global trade flows. Flooring manufacturer Tarkett withdrew a planned amend-and-extend loan transaction amid the volatility.
Some companies are already pivoting operationally. Jaguar Land Rover, for instance, announced it would pause US-bound car shipments in April, citing cost uncertainty. The company’s euro-denominated bonds fell more than a point in Monday trading.
Still, some market participants see a silver lining. According to Morgan Stanley, the current credit cycle differs from past downturns in key respects: corporate balance sheets remain generally sound, LBO activity has been more muted in recent years, and much of the investor base — including US life insurers — has a long-term, liability-matching orientation.
“Cyclicals are being marked down across the board, almost indiscriminately,” said Severin Testroet, Portfolio Manager at Helaba Invest. “But with US trade policy in flux, even a partial rollback or targeted exemptions could quickly turn sentiment.”
