DC Advisory's European Debt Market Monitor: Q3 2025 & Outlook

European debt market

Q3 2025 overview

European credit markets delivered another strong quarter with Broadly Syndicated Loan (BSL) market volumes totalling €62 bn in Q3 2025 [1]. This brought year-to-date volumes to €211 billion, already surpassing full-year 2024 totals, the previous high [2].

Concerns over transatlantic trade eased in August once the US and EU agreed on a 15% tariff ceiling on most European goods entering the US[3], reducing the risk of further escalation and improving market sentiment.

Repricing, extension, and refinancing transactions continued to dominate, accounting for roughly two-thirds of volumes this quarter [4]. Average Euro single-B TLB spreads tightened to ~366 bps, while all-in yields fell to 5.83%, the first sub-6 % reading since mid-2022 [5].

The M&A market showed early signs of a rebound, supported by an extremely receptive credit market. Non-refinancing new-issue volumes rose to €17.2 billion in the quarter [6], the highest since 2021, and we expect a visible pipeline of sponsor processes to sustain momentum into Q4 and 2026.

Private credit markets showed similar themes. Q3 2025 deployment reached €27.4 bn across 310 transactions, bringing YTD volumes to €84.9 bn, up 14% year-on-year [7]. Competition among direct lenders, banks, and the BSL market remained intense, further compressing Unitranche pricing and reducing fees.

After several years of strong fundraising, record levels of dry powder have increased pressure on private credit lenders to deploy. The value of European private credit assets under management is estimated to be roughly USD 500 bn [8], highlighting the scale and influence of private credit on overall debt-market liquidity. 

We have observed a decline in lenders' focus on Environmental, Social, and Governance (ESG) requirements. Recent geopolitical conflicts have underscored the importance of energy security and prompted national governments to increase defence spending to meet NATO commitments [9]. Borrowers operating in energy Infrastructure, Defence, and adjacent sectors are finding that ESG assessments have become less restrictive.

Outlook

October loan issuance totalled €12.7 bn, maintaining the robust activity of 2025, with spreads remaining in the mid-300 bps range [10].

However, the Chapter 11 bankruptcy filing of First Brands [11] has reverberated through global credit markets, with several lenders taking losses on the credit. The BSL market reacted with caution, becoming less tolerant of opportunistic repricings in the near term, and as a result, we anticipate a moderate slowdown in volumes.

Given the ample liquidity available in private credit, direct lenders are well-positioned to absorb any slack left by the BSL market.

On a macro level, the European Central Bank’s (ECB) benchmark rate has remained at 2% since June 2025 [12], while core inflation has stabilized at around 2.1% [13], supporting favorable borrowing conditions. 

Given the noticeable increase in M&A processes, we expect M&A-related volumes to continue rising through Q4 and into early 2026. With deep lender liquidity and resilient demand, we believe private credit markets are well-positioned to maintain momentum into year-end, especially considering the caution in the BSL market.

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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 October 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 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.

The October 2025 DC Advisory Lender Survey: (DC Advisory’s independent survey of 98 European banks and direct lenders. which was completed in October 2025 and conducted across the UK, France, Germany, Austria, Switzerland, Spain, Belgium, the Netherlands, and Luxembourg (referred to herein as the “The October 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 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.)