European Private Credit Sets First-Half Record as Large Deals Shift to Public Markets

European direct lending reached a record €63.16 billion ($73.6 billion) in the first half of 2026, keeping the market on course for another potentially record year even as second-quarter activity slowed amid stronger competition from broadly syndicated loans and high-yield bonds.

Direct lenders completed 296 deals totaling €28.4 billion in the second quarter, down 25% from €38.04 billion across 367 transactions a year earlier, according to Debtwire data. Volume also declined from €34.8 billion in the first quarter, although the relatively modest fall in deal count from 303 transactions suggests the slowdown was concentrated primarily among larger financings.

The figures illustrate a changing competitive environment for European private credit. Direct lenders continue to deploy capital at historically high levels, particularly in the middle market, but large borrowers are increasingly able to access syndicated loans and high-yield bonds as public credit markets offer attractive pricing and substantial liquidity.

That competition is likely to shape private credit deployment through the remainder of 2026.

Record First Half Masks Q2 Shift

Despite the second-quarter decline, European direct lending volume during the first six months of 2026 exceeded every previous half-year period tracked by Debtwire.

The €63.16 billion first-half total puts the market in position to at least approach the record annual volume achieved in 2025 if activity remains resilient during the second half.

The composition of transactions, however, is changing.

Refinancings accounted for approximately 37% of direct lending proceeds during the second quarter, demonstrating that private credit managers are increasingly competing not only for acquisition financing but also for existing borrowers seeking to restructure or extend their capital arrangements.

At the same time, Europe’s institutional leveraged finance markets have recovered strongly. Combined leveraged loan and high-yield bond issuance reached approximately €128.3 billion in the second quarter, according to Debtwire, creating a significant alternative for larger companies that might otherwise have relied on direct lenders.

The shift mirrors developments PE NEWSWIRE has tracked in the U.S., where a widening financing cost differential has pushed some borrowers toward bank-led loans over private credit. In those markets, syndicated financing can offer lower spreads when investor demand is strong enough to support large transactions.

For European direct lenders, the result is greater pressure to compete on flexibility, execution certainty and structural complexity rather than pricing alone.

Ares Leads Large-Cap Direct Lending

The first-half rankings also show how the European market is becoming increasingly segmented by borrower size.

Ares Management ranked first among large-cap direct lenders by deployed capital, completing approximately €2.51 billion of transactions and capturing an 11.6% share of large-cap lending volume.

Blackstone Credit followed with roughly €2.15 billion, while Goldman Sachs Private Credit ranked third with approximately €1.74 billion.

The rankings changed in the middle market, where Arcmont Asset Management led with €1.48 billion of transaction volume and a 10.5% market share. Ares followed closely with €1.46 billion, while Pemberton Asset Management completed approximately €1.17 billion of midmarket transactions.

Ares returned to the top position in small-cap lending, recording €461 million of volume, ahead of Arcmont at €430 million and Eurazeo at €415 million.

The figures demonstrate why scale is becoming increasingly important in European private credit. The largest alternative asset managers can operate across large-cap, midmarket and smaller transactions while also offering borrowers products ranging from unitranche loans to subordinated debt and other structured financing.

That flexibility can become particularly valuable when syndicated markets are volatile or borrowers require financing structures that are difficult to execute through broadly distributed debt.

Public Markets Challenge Private Credit for Large Deals

The Q2 slowdown does not necessarily signal weakening demand for private credit.

Instead, the relatively stable transaction count combined with lower aggregate volume indicates that fewer large financings reached direct lenders during the quarter. Debtwire said an especially active first quarter for big-ticket transactions partly explains the sequential decline.

Competition from public credit markets provides another explanation.

When leveraged loan and high-yield markets are functioning smoothly, large borrowers can often secure cheaper financing because institutional demand allows banks to distribute debt across a much wider investor base. Private credit generally commands a premium in exchange for certainty of execution, confidentiality and greater flexibility around loan documentation.

Apollo’s 2026 Credit Outlook argues that European private credit nevertheless retains structural advantages, including lower direct-lending penetration than the U.S., constrained regional bank lending and opportunities created by Europe’s regulatory, legal and currency complexity. Apollo also noted that European unitranche loans have generally priced at wider margins than comparable U.S. transactions.

Those characteristics help explain why managers continue raising substantial pools of capital for European lending even as competition intensifies.

Private Credit Managers Broaden Distribution

The expansion of direct lending is also being supported by efforts to bring private credit beyond traditional institutional fund structures.

Asset managers are developing vehicles combining public and private debt, evergreen structures and products designed for wealth investors as they seek additional sources of capital.

PE NEWSWIRE previously reported on Capital Group and KKR’s European public-private credit strategy, which allocates roughly 40% of its portfolio to private credit managed by KKR alongside public fixed-income investments. The strategy demonstrates how major managers are creating more accessible channels for private lending exposure.

Such products could broaden the capital base supporting direct lending while reducing managers’ dependence on traditional closed-end institutional funds.

For borrowers, however, greater private-credit fundraising also means more competition among lenders seeking to deploy capital.

Second Half Will Test Private Credit’s Competitive Position

The record first-half figures leave European direct lending entering the remainder of 2026 from a position of considerable strength.

But the second-quarter slowdown highlights an important distinction between market growth and market share.

Direct lenders are still financing hundreds of European companies and deploying capital at historically high levels. Yet strong syndicated loan and high-yield markets are giving larger borrowers more options, forcing private lenders to compete harder for transactions that might have remained firmly within direct lending during periods of public-market disruption.

That could increasingly push private credit toward situations where its structural advantages matter most: middle-market acquisitions, complex refinancings, bespoke capital structures and borrowers requiring certainty of execution.

If public credit markets remain receptive, direct lenders may find it harder to dominate Europe’s largest leveraged financings. But with €63.16 billion already deployed during the first half, the asset class does not need large-cap dominance to produce another record year.

The more important test will be whether managers can maintain underwriting discipline as growing pools of private capital compete for a limited supply of attractive loans.