DC Advisory's European Debt Market Monitor: Q2 2025 & Outlook

European debt market

Q2 2025 overview

Institutional loan volumes fell sharply this quarter to €49.4bn, down from €99.8bn in Q1 [1], as the Broadly Syndicated Loan (BSL) market effectively shut in April following the US tariff announcement (Liberation Day).

The slowdown proved brief – lenders and borrowers had re-engaged by May, albeit still grappling with an evolving trade policy landscape. Activity then accelerated into June, the busiest month of 2025 so far for new loan volumes [2], as sentiment improved on the back of a more transparent US trade policy.

Refinancing, repricing, and amend-and-extend (A&E) transactions continued to dominate this quarter, accounting for roughly 70% of institutional volumes [3]. In keeping with Q1, we observed borrowers take advantage of receptive market conditions to extend maturities and reduce pricing. However, this was at a slower rate as repricing volumes fell to €17.2bn from Q1’s €52.3bn peak, and average TLB spreads finished the quarter marginally above Q1 levels [4].

With M&A activity constrained, sponsors continued to leverage dividend recapitalizations, NAV financings, and secondary transactions to return capital to LPs. Recapitalization volumes have reached €9.9bn YTD versus €6.6bn for the same period of 2024 [5], often structured with portability features to preserve exit flexibility. 

The temporary April dislocation in the BSL market was welcomed by private credit lenders who saw an opportunity to lend at a record pace. Coupled with deployment pressure and reduced margin expectations, we saw the return of jumbo unitranche transactions and direct lending volumes reach €36.7bn [6] - surpassing the previous high set in Q1 2024. 

Outlook

M&A-related loan volumes remained muted for most of the quarter. However, we have observed the pipeline building, with increasing sponsor-led processes in the UK, France, and DACH now in-market or preparing to launch.

Easing macro conditions have helped to support this momentum. In June, the ECB cut its benchmark rate to 2% [7], its fourth reduction of 2025, while core inflation continued to trend lower across much of the Eurozone.

Although risks over global trade developments and political volatility remain, the European credit markets are entering H2 with deep lender liquidity, a visible pipeline of new deals, and constructive technical conditions.

Given these dynamics, we anticipate a rebound in activity through Q3 and the remainder of 2025. While refinancing, repricing, and A&E transactions will likely remain the primary drivers in the short term, the growing M&A pipeline should generate meaningful incremental volume.

We believe credit markets are highly supportive and well-positioned to absorb the increase in supply. However, aside from the UK, we do not expect the resurgence of jumbo unitranche transactions to persist, as larger borrowers re-engage in the BSL market following its reopening in Q2.

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References

*Unless otherwise indicated, all tables, data and statistics provided in this piece, including with respect to deal activity, have been collected via the August 2025 DC Advisory Lender Survey, subject to the limitations as described below.

**Transactions for the Italian region have been sourced from the LSEG Loan Connector (which is a publicly-available web-based loan information platform), as well as company press releases and filings, but has not otherwise been independently verified with the lenders. The region has been incorporated into the Debt Market Monitor from Q1-24 and therefore, transactions are only reported from the Q1-24 period.

The August 2025 DC Advisory Lender Survey: (DC Advisory’s independent survey of 98 European banks and direct lenders. which was completed in August 2025 and conducted across the UK, France, Germany, Austria, Switzerland, Spain, Belgium, the Netherlands, and Luxembourg (referred to herein as the “The August 2025 DC Advisory Lender Survey” or the “Survey”). Any such data, including league table data referenced herein is limited to the data provided by the Survey participants and is not meant to constitute definitive market data. The banks and lenders selected for the Survey are based on those that are most active in the market, and that DC Advisory interacts with the most. Accordingly, the Survey participants do not constitute an exhaustive list of banks and lenders who may have been active during the period addressed by the Survey. Comparisons to deal activity or other statistics from prior quarters or other periods are calculated by comparting the results of the Survey to the results from DC Advisory Lender Survey corresponding to the prior period, subject to the same limitations described above.)