The private credit conversation has split into two camps and middle-market operators should ignore both of them.
Camp one: the sponsor-side voices reassuring everyone that recent BDC downgrades, gated redemptions at major funds, and new NAIC scrutiny are normal cycle behavior. Move along.
Camp two: the GFC-redux crowd pointing at securitization of troubled loans and saying we’ve seen this movie before.
Neither framing helps the people I actually talk to every week: operators weighing whether to sell, recapitalize, or refinance into the next cycle. The honest read on 2026 is that the M&A window is genuinely opening — rates easing, valuation gaps narrowing, pressure to deploy capital. And there’s a private credit undercurrent that’s changing the game.
A few things worth paying attention to inside the next 18 months, whether you’re selling, recapitalizing, or refinancing:
The gap between A-quality and average is widening, even as headline valuation gaps narrow. Sponsors with stretched hold periods and LP pressure are competing aggressively for premium businesses with recurring revenue and clean financials. Average businesses are seeing crowded bidder lists at thinner pricing. “Pretty good” is no longer pretty good enough.
Structure is doing more of the work than headline price — on every kind of deal. On sales: earnouts, rollovers, and seller financing are bridging more of every transaction, and most earnouts don’t fully hit. On recaps and refis: PIK is showing up in roughly one in ten private credit loans, often added after origination. Borrowers near the middle of the coverage distribution are increasingly being asked for fresh equity to reset the stack. The number on the term sheet and the number in your hands are increasingly different conversations.
The insurance side of all this is quietly carrying real exposure: Roughly a third of the life insurance industry’s $6 trillion in assets sits in private credit. Carriers’ balance sheets, RWI underwriting on sponsor-backed buyers, and the broker rollups distributing it all are more entangled with this story than most operators realize.
The honest answer for most operators I work with is: it depends. On your sector, your buyer or lender universe, your tax posture, and how much of your net worth lives inside the business. But the time to map that out is before the term sheet hits the desk, not after.
If you want a longer version of how we’re thinking about the downstream effects, we wrote a white paper on it last month.
Greenleaf Capital Partners, Centered Partners
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