DC Advisory's European Debt Market Monitor Q2 2026 & Outlook
Date
September 15, 2026 • 7 min read
Introduction
- European institutional loan issuance reached €32.5 bn in Q2 2026, up 36% quarter-on-quarter and the busiest quarter since Q1 2025, as average spreads on European TLBs fell to their lowest level since Q1 2008
- Refinancings, extensions and repricings accounted for approximately 65% of activity, confirming a technical, refinancing-led recovery rather than an M&A-driven one, even as high-yield issuance set a quarterly record of €46 bn
- Mid-market activity diverged sharply by geography: the UK, France, DACH and Ireland posted stable-to-strong deal volumes, while Spain and the Benelux market saw activity moderate amid geopolitical and valuation-driven caution
European overview
The European BSL market rebounded strongly in the second quarter of 2026. Total new loan issuance, including refinancings, reached €32.5 bn, up 36% quarter-on-quarter and the busiest quarter since Q1 2025, while year-to-date institutional activity of €168 bn ran ahead of the €150 bn recorded over the same period in 2025.[1] The reopening was underpinned by a partial de-escalation of the Middle East conflict and by continued CLO formation outpacing loan supply, which left borrowers firmly in control of price and structure.[2] Average spreads on European Term Loan B facilities fell to their lowest level since Q1 2008.[3]
Repricings and extensions dominated activity, accounting for approximately 65% of the quarter's volume, up from 38% in Q1 2026.[4] We believe this confirms that the rebound has been a technical, refinancing-led recovery rather than one driven by M&A, as strong lender demand continued to outpace new loan supply. High-yield issuance set an all-time quarterly record of €46 bn.[5] Private credit volumes, by contrast, declined to 30 deals worth €6.7 bn, down from 37 deals worth €8.6 bn in Q1, reflecting broad-based de-risking linked to AI-related and geopolitical uncertainty.[6]
Regional highlights
France recorded the highest mid-market transaction count of the markets covered, with 103 deals, up from 77 in Q1 2026 and 88 in Q2 2025, as banks financed over 65% of transactions[7] and the Industrials, Aerospace & Defense sectors continued to insulate the market from AI-driven volatility. Italy followed closely by value, with approximately 326 deals worth €13 bn, up from 311 deals worth €9 bn in Q1 2026, supported by a rebound in domestic M&A activity.[8] Beyond these two markets:
- UK: 69 transactions in Q2 2026, up from 60 in Q1 2026 and 63 in Q2 2025,[9] with pricings tightening further and lender attention rotating toward "AI-proof" sectors such as infrastructure services
- DACH: 42 deals closed, up 26% quarter-on-quarter, with LBO activity rebounding to 15 announced transactions versus eight in Q1 2026[10]
- Ireland: A 12% year-on-year increase in deal volume,[11] driven by consolidation in AI-related technology, Financial Services and construction services
- Benelux: 30 transactions recorded, with refinancing and amend-and-extend activity representing 76% of the market[12] as sponsors extend holding periods rather than pursue exits
- Spain: 19 debt transactions, down from 21 in Q1 2026 and 40% below Q2 2025, as new-money LBO financings fell to two deals from 13 in the prior quarter[13]
Taken together, the UK, DACH and Ireland demonstrated stable-to-growing volumes alongside France and Italy, while Spain and Benelux activity moderated amid geopolitical and valuation-driven caution, illustrating the divergence in mid-market conditions across the continent this quarter.
Outlook for H2 2026
We expect record CLO demand, negative net loan supply and substantial dry powder to sustain tight pricing into the second half of 2026, with pricing conditions, rather than the availability of financing, remaining the primary constraint on borrowers. We believe a recovery in M&A activity remains the key swing factor for the leveraged finance market, with a large-cap pipeline building for the autumn, including notable transactions in the Industrials and infrastructure services sectors. While the ECB raised its three key rates for the first time in over a year[14] does introduce incremental uncertainty, we anticipate private credit will remain selective while M&A and exit valuations normalize.
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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 2026 DC Advisory Lender Survey, subject to the limitations described below.
The August 2026 DC Advisory Lender Survey: (DC Advisory’s independent survey of 99 European banks and direct lenders, which was completed in August 2026 and conducted across the UK, France, Germany, Austria, Switzerland, Spain, Belgium, Netherlands and Luxembourg (referred to herein as “The August 2026 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 with which DC Advisory interacts 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 comparing 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.)
**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 have not otherwise been independently verified with the lenders. The region has been incorporated into the Debt Market Monitor beginning in Q1 24 and, therefore, transactions are only reported from Q1 24 and onward.
- https://pitchbook.com/news/reports/q2-2026-european-credit-markets-quarterly-wrap
- https://pitchbook.com/news/reports/q2-2026-european-credit-markets-quarterly-wrap
- https://pitchbook.com/news/reports/q2-2026-european-credit-markets-quarterly-wrap
- The August 2026 DC Advisory Lender Survey
- https://pitchbook.com/news/reports/q2-2026-european-credit-markets-quarterly-wrap
- https://pitchbook.com/news/reports/q2-2026-european-credit-markets-quarterly-wrap
- The August 2026 DC Advisory Lender Survey
- https://www.giornaledellepmi.it/ma-italia-nel-1-semestre2026-rapporto-kpmg-il-mercato-rallenta-operazioni-per-22-miliardi/
- The August 2026 DC Advisory Lender Survey
- The August 2026 DC Advisory Lender Survey
- https://renatus.ie/private-equity-ireland-ma-report-h1-2026/
- The August 2026 DC Advisory Lender Survey
- The August 2026 DC Advisory Lender Survey
- https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.mp260611~4d41bd5e83.en.html
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United Kingdom
United Kingdom
United Kingdom
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Netherlands
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Spain
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Italy
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