The State of Private Credit in Europe (Third of a Series)

For a sense of overall credit conditions, we tuned last week into the European Leveraged Finance Mid-Year Update hosted by Fitch. The discussion – covering the economy, ratings, covenants, and structures – was virtually indistinguishable from recent US market conferences. Apart from these panelists’ distinguished accents.

For example, activity for leveraged loans in Europe has generally returned to that of pre-Covid levels. The pendulum for terms, that had swung investor-friendly a year ago, is much more issuer-friendly this year. Also, the asset recovery from last year’s downturn is so complete that there’s hardly an element of caution remaining to tamp down frothy conditions.

Our friends at Tikehau reported in a private note that 1Q European leveraged finance activity, combining both loans and bonds, was just under €80 billion; more than double 4Q’s performance. New-issue institutional loan volume for 1Q showed even greater growth, to more than €35 billion from under €10 billion from the previous quarter (data courtesy S&P Global Market Intelligence).