Global Credit Weekly

A closer look at private credit in Europe

December 4, 2025 | Amanda Lynam, Dominique Bly

Key takeaways

  • Two weeks ago, we explored fundamental trends in the U.S. private credit market. The takeaway was that 3Q2025 data highlighted incremental improvement across a range of aggregate metrics, including covenant defaults and interest coverage ratios. That said, under the surface, dispersion was evident across various dimensions, including borrower size, sector, and vintage.
  • In this Global Credit Weekly, we undertake a similar analysis of the European private credit market and find that many of the high-level conclusions are consistent with its U.S. peer. We observe incremental improvement in aggregate interest coverage and covenant default metrics, while also noting significant dispersion (in EBITDA growth, as one example) across the size and sector dimensions. Instances of covenant ‘holidays’ and ‘bad PIK’ – which have increased modestly in recent quarters, but remain largely contained – warrant monitoring, in our view, and underscore the importance of manager underwriting experience and restructuring expertise.
  • The diverse country mix of the European private credit market is unique and highlights the value of regional expertise and the need for a local presence in sourcing and underwriting. At the same time, a broad geographic footprint can help allocators deploy capital tactically, as country-specific tailwinds change over time.
  • The European economy is more reliant upon bank lending relative to the U.S., which has large and well-developed syndicated and private financing markets (Exhibit 1). As we have outlined previously, we see scope for the financing mix in the Euro Area to become more diversified over time, which suggests additional room for growth in private markets.

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Authors

Amanda Lynam, CPA
Head of Macro Credit Research, Private Financing Solutions
Amanda Lynam, CPA, is Head of Macro Credit Research within the Private Financing Solutions. In this capacity, Amanda leads a team that generates differentiated investment strategy research across global fixed income, liquid corporate credit (IG, HY, leveraged loans) and alternative asset (private credit, real estate) markets.
Dominique Bly
Macro Credit Research Strategist, Private Financing Solutions

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