Making Sense What’s the outlook for credit financing in 2026?
Jan 21, 2026
Lou Cerrotta, Head of Liquid Credit Financing at J.P. Morgan, shares his insights on the evolving landscape of credit financing. He discusses how tighter credit spreads are influencing loan trading activity and highlights new opportunities in asset-based lending. The conversation delves into the growing demand for loan total return swaps as well as forecasts for increased LBO activity and the surge of B-/CCC-rated issuers. Regulatory changes and their impact on banks also feature prominently, making this a must-listen for finance enthusiasts.
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Loan TRS Became Primary Leverage Tool
- Loan TRS demand surged in 2025 as clients used synthetic exposure to achieve leverage when traditional financing was limited.
- Trading volumes rose >20%, and clients used swaps to offload operational burdens to J.P. Morgan.
Fewer Distressed Exchanges In 2025
- Distressed exchanges and liability management exercises fell by about half in 2025 versus the prior year.
- Improved growth and a more accommodative Fed made 2024 an outlier and reduced restructuring activity.
Prepare For Rising Loan Supply
- Expect a sizable increase in loan gross and net supply driven by LBOs as rates and spreads compress.
- Position to pick opportunistic credits, especially among growing B- and CCC-rated issuers.