Buyout holdings face leverage challenges

Chart  •  August 29, 2025

In this chart

In another sign of pressure in private equity, debt comfort levels in buyout holdings have deteriorated.  

By Q1 2025, roughly 55% of buyout holdings sat in the tight, tapped-out or breach zones of their leverage cap, a limit to manage borrowers’ risk. The squeezed leverage could hamper the growth options for portfolio companies — and their private-equity owners. 

Stacked area chart titled “Buyout holdings face leverage challenges,” showing the proportion of buyout holdings within four leverage zones—Comfort (blue), Tight (green), Tapped out (orange), and Breach (pink)—from Q1 2015 to Q1 2025. From 2015 through 2022, the majority of holdings remained in the Comfort zone. Starting in 2022, the share in Comfort sharply declined, with a marked increase in the Tapped out and Breach zones. By Q1 2025, around 55% of buyout holdings were classified as Tight, Tapped out, or Breach, indicating significant stress in leverage levels. Y-axis represents percentage (0% to 100%), and the x-axis covers quarterly periods from 2015 to 2025.

Data as of Q1 2025. Bands: Breach (headroom < 0 turns); tapped out (headroom = 0-0.5 turns), tight (headroom = 0.5-1 turns), comfort zone (headroom ≥ 1 turn). Leverage-cap and headroom calculations use base rates data and private-debt cash spreads, net debt and EBITDA data. Source: Federal Reserve Bank of St. Louis’s FRED, MSCI Private Credit Security Terms, MSCI Private Capital Universe

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