European private credit hits record as PE firms scramble for refinancing

Direct lending by European private credit firms surged to a record €63.2bn (£54.1bn) in the first half of 2024, according to data from analytics platform Debtwire. The jump, driven mainly by activity in the first quarter, reflects private equity owners postponing sales and seeking to extend the maturities of their portfolio companies’ loans.

The surge matters because it signals a shift in financing patterns for mid‑size and large companies across the continent. With banks pulling back from higher‑risk borrowers, private credit has become the go‑to source for speed and flexibility, but at a higher cost. The influx of refinancing deals also hints at broader stress in the private‑equity exit market, which could affect valuations and future fundraising.

Why refinancing is driving the boom

In the first three months, private credit lenders disbursed €34.8bn, a figure that dwarfs the €28.4bn recorded in the second quarter, a 25 per cent year‑on‑year decline. Patrick Costello, EMEA private credit analyst at Debtwire, explained the dynamics:

“The lack of exit prospects, especially for private‑equity‑backed companies, is a big reason lenders and sponsors look to push maturities out with a refinancing.”

Costello added that large‑cap firms were opting for public‑market debt, which is cheaper than private credit, leaving lenders to chase smaller, mid‑market opportunities where competition remains fierce.

Regional trends and market players

Deal flow slowed across most markets in Q2. The Nordic states saw the steepest drop, with deals falling 23 per cent year‑on‑year to 30. France recorded a 17 per cent decline but still completed 91 transactions, second only to the UK and Ireland, which logged 186 deals.

Among lenders, investment‑management giant Ares led with 31 new deals, representing roughly 7.8 per cent of total market activity. Arcmont followed with 23 deals (5.7 per cent) and Apollo posted 20 deals.

What lies ahead

Costello expects refinancing activity to remain strong through the second half of the year and into 2025, provided merger‑and‑acquisition volumes do not rebound sharply. Large borrowers are likely to continue favouring public‑debt routes, which could keep private credit focused on the mid‑market segment.

For investors, the expanding private‑credit pool offers higher yields but also heightened exposure to credit risk, especially if the broader economy slows. Companies seeking capital may need to weigh the cost premium of private funds against the relative ease of access.

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