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Analysis Private credit
Direct lending poised to break records but...
by Ben Watson, Debtwire
Although the volume of direct lending is burgeoning and likely to set a full year record in 2025, questions are growing about lending standards and the sector’s impact on financial stability
Issuance volumes in the European direct lending market have reached EUR 85bn for the first nine months, exceeding the total reached at the same point in 2024, according to Debtwire data. Lenders have focused on technology, services and healthcare firms, a continuation of 2024 trends. Between them, those sectors represent almost two-thirds of total volume.
Number of European deals-investments in 9M25
Source for all data: Debtwire
The high overall volume has included a number of large deals this year, with three deals ranking among the top 15 largest-ever transactions. Leading the pack is Adevinta’s EUR 6.5bn refinancing and dividend recap, the largest European direct lending deal ever. Funecap (EUR 1.7bn) and Constellation Automotive (GBP 1.3bn) secured positions 11 and 12, respectively.
927
The number of deals in 9M25 was up 5% on the same period last year
Geographically, the UK remains the core financing hub — but it’s the only region to see a decline in deal count. Elsewhere, activity expanded, with the Nordics posting the strongest growth — up 23% to 64 deals.
Private credit follows in the footsteps of its more mature sibling — public leveraged loan syndication — while competing for dominance. The large-cap space has been the key battleground. Leveraged loan spreads tightened to low levels in the first half, while direct lenders squeezed unitranche pricing to a weighted average of 520bps over the benchmark — the lowest on record.
European direct lending volume
Direct lending vs public leveraged market
Both public and private credit markets deliver strong 2025 volumes
Margin vs leverage
Unitranche margins fall while corporate leverage rises in 3Q25
Source for all data: Debtwire
Direct lending wins in April
When April’s so-called ‘tariff tantrum’ triggered a market dislocation and a stumble in public syndication, direct lenders seized the moment. Issuance hit EUR 14bn across more than 100 deals — the second-highest monthly total this year — as direct lenders were able to offer certainty of execution and captive funds for continual deployment.
Unitranche pricing then rose in the third quarter, climbing to a weighted average of 590bps, driven largely by large-cap borrowers. Margin data collected on approximately 50 unitranche deals confirms the trend.
84.9
bn
€
Deal volume in 9M25 was up 14% on the same period last year
Looking ahead, scrutiny is intensifying. The collapses of auto parts supplier First Brands and subprime auto lender Tricolor have focused attention, including that of regulators, on private credit and its growing share of lending, and raised questions about potential systemic risk.
Investors have sharpened their focus on due diligence and fund differentiation, and direct lenders have been busy checking the pantry for signs of cockroaches. Meanwhile, the repricing wave sweeping public markets is expected to exert downward pressure on direct lending margins, forcing some direct lenders to concede on pricing.
