Direct lending by private credit firms in Europe reached a record €63.2bn (£54.1bn) in the first half of the year as private equity firms turned to debt renegotiations amid a weak dealmaking environment.
The figures mark a sharp increase from roughly €40bn (£34bn) recorded in the same period last year, according to data from analytics platform Debtwire. A surge in borrowing during the first three months of the year drove the growth, as a lack of company sales forced private equity owners to refinance existing debts.
Non-bank lending has grown in recent years as traditional banks reduce exposure to higher-risk businesses, while borrowers seek the speed and flexibility offered by direct lenders.
However, direct lending dropped 25% year-on-year to €28.4bn (£24.3bn) in the second quarter following a slowdown in mergers and acquisitions. Debtwire analysts attributed the drop to large companies choosing public debt markets to secure lower borrowing costs instead of using direct lenders. The shift left private credit firms competing for smaller mid-market deals.
Overall transaction volumes also fell across regional markets as large-scale borrowing slowed. Nordic countries recorded the largest decline, with deal numbers falling 23% year-on-year to 30. France saw a 17% drop to 91 deals. The UK and Ireland recorded the highest total with 186 transactions.
Among direct lenders, Ares Management completed 31 deals to hold a 7.8% market share. Arcmont Asset Management completed 23 deals for a 5.7% share, while Apollo Global Management ranked third with 20 deals.
Refinancing activity slowed after the first quarter, when direct lenders provided €34.8bn (£29.7bn).
