USA Trends and Developments Contributed by: Stelios G Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins LLP
in both public and private markets, with private credit and infrastructure debt being key components of the financing strategy. In terms of real assets, the need for financing is clear. JPMorgan reports that US data centre-related bond issuance reached USD15.1 billion in 2025, surpassing the total for 2024. They estimate that around USD150 billion will be needed in 2026–2027 to convert short- term construction loans into long-term financing for nearly 20 gigawatts of data centre capacity. Given that only USD53 billion was issued in the past dec - ade, a wider range of investors and additional debt options, such as corporate loans and private capital, will be necessary to meet this demand, likely leading to higher costs to attract more investors. In terms of legal structuring, certain patterns are emerging: combining construction and permanent financing with milestones for leasing, splitting assets to optimise collateral and tax considerations, providing strong support for project completion, co-ordinating between different lenders, and including power-relat - ed agreements in financings. Strong documentation is important, as defaults and breaches of agreements are more common among smaller borrowers, favour - ing experienced lenders with the ability to manage distressed loans and enforce strong agreements. Away from infrastructure, within the AI industry, devel - opers are increasingly borrowing to cover the gap between immediate spending and future revenues. This situation is expected to create more opportuni - ties for private credit providers to provide funding to the right AI developers. With no end to the AI surge in sight, the industry’s capital demands mean private credit will continue to grow as a long-term partner in developing data cen - tres and energy infrastructure. Successful players will combine smart asset-backed financing with clear exit strategies, effective risk management related to pow - er, and careful design of agreements that align with the AI investment cycle. Challenges in Private Credit Private credit is becoming more competitive and transparent as banks reassert their influence and
investors look for opportunities between private and public markets. Interest rates on loans have decreased significantly, with typical direct lending rates now fac - ing competition from broadly syndicated loans, which puts pressure on returns. In recent years, refinancing has become a two-way street, with private loans often being refinanced into public loans where previously only the converse was true, giving borrowers more negotiating power. In some ways, refinancing into public loans benefits private credit as it gives funds opportunities to return capital and improve DPI sta - tistics, so this challenge may be a mixed blessing for some private credit funds. In this environment, managing financial obligations is becoming standard practice in sponsor finance. A significant portion of prior-vintage private credit loans are set to mature in 2028, and borrowers will be incen - tivised to prioritise early refinancing and restructuring to avoid last-minute issues. Some of these vintages have loan agreements that are more flexible, allowing for looser terms and creative financial arrangements to manage debt maturities and covenant stress more effectively. However, the success of these strategies still depends on careful loan assessment and effective management of troubled loans, and smart borrowers will also have to be mindful of maintaining strong rela - tionships with their private credit partners. Increased scrutiny from investors and regulators, especially from insurance companies that are major sources of capital for private credit, may also impact the market. New regulations have provided more transparency regarding private credit activities. While there are concerns about potential risks in certain areas, these are not expected to pose a systemic threat to insurers. With this increased scrutiny, we see insurers realising the importance of choosing the right managers to partner with, and the value of maintain - ing strong documentation and of active and ongoing monitoring. Finally, new trends are creating opportunities in the market. Financing for data centres and related pro - jects is growing rapidly, requiring diverse financial solutions where private credit works alongside other funding sources. Investment vehicles that are accessi - ble to retail investors are also expanding, which could
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