KKR, Carlyle and Oaktree consider buying discounted loans as 286 credit lines open near a record

Specialist buyers stage for the cheapest loan market in 18 months

The sell side of October's credit rout has had the headlines. The more consequential development is the buy side: Carlyle Group, KKR & Co and Oaktree Capital Management are among the money managers considering buying US leveraged loans, the floating-rate loans to companies already carrying heavy debt, at discounted prices and packaging them into collateralized loan obligations, or CLOs, bonds built from bundles of these loans ¹.

To fund the buying, fund managers have opened about 286 short-term warehouse credit lines, a near record, according to Barclays strategists↗ ¹. Specialist credit money rarely builds financing capacity at this scale unless it expects to buy cheap and be repaid at par.

The selloff has spread beyond the credits that deserved it

Loans are cheap by an 18-month measure: more than 90% of the $1.5 trillion leveraged loan market traded below face value earlier this week, and spreads sit near their widest of the past year ¹. What matters for buyers is who is selling.

October's weakness started in stressed, low-rated credits and has broadened into higher-quality names, said Ian Gilbertson, co-head of US CLOs at Invesco▲+1.93% — Invesco, up 1.93 percent today, creating a more attractive entry and pushing some managers to accelerate new CLO formation ¹. Cheap paper on sounder borrowers is the entry CLO managers want, and Gilbertson says it is now there.

AI borrowers have moved into the repriced market

The loan market being marked down is no longer just cable television and legacy industrials. Since April, neoclouds, the AI computing providers renting out GPU servers, including CoreWeave▼−3.81% — CoreWeave, down 3.81 percent today, Lambda and CrusoePVT$26.61B — Crusoe, private, latest valuation $26.61B, have launched loan deals, and institutional loan issuance backing data-center infrastructure totals $16.5 billion this year, per PitchBook LCD↗, up from about $2 billion in all of 2025 ³.

Volta Infrastructure, a neocloud, launched a $5 billion loan package that priced only after banks sweetened terms past an 11% yield ³⁴. CLOs own about two-thirds of the leveraged loan market ¹, so the warehouse lines now open are the marginal buyer these borrowers will need as conventional funding tightens.

Intent staged, formation lagging

New-issue CLO volume is down more than 16% this year ¹, and the hardest security to sell, CLO equity, has been the brake.

Deutsche Bank counts equity distributions averaging 2.8% this quarter, on track for the first uptick since 2024, while the arbitrage between what a CLO earns on its loans and what it pays bondholders has widened to 1.41 points against a 1.16-point one-year average ¹. Cheaper loans improve that math. Whether equity buyers show up decides if the 286 lines close into live CLOs or sit as staged inventory ¹.

CLOs closing in coming weeks is the test

Two camps want opposite things from the same market: holders and weak borrowers need the selloff to stop, while these buyers need it to deepen enough to buy near 97 cents on the dollar and be repaid at 100 ¹.

Michael Levitin, portfolio manager at credit manager MidOcean Partners, points to the separation between companies that can live with today's cost of capital and those whose capital structures were built in different environments ¹. The record reads more like bottom-forming than knife catching, because this buyer is paid to hold to par rather than flip a bid.

The test is whether new CLOs close in the coming weeks. If they do, the selloff found its buyer, and the AI-linked borrowers who structured debt for this market get refinanced. If they do not, the lines were optionality rather than a floor, and the repricing continues without them.