DC Advisory's European Debt Market Monitor: Q4 2025 & Outlook

European debt market

2025 overview

The European Broadly Syndicated Loan (BSL) market closed 2025 with record levels of activity, total institutional loan volumes reaching €250 bn, up from €207 bn in 2024, the previous high[1].

Activity was overwhelmingly driven by refinancings, repricings and extensions, accounting for 60.6% of volumes in 2025 overall and 58.3% in Q4[2]. We observed borrowers take advantage of liquidity and strong investor demand to reduce margins and extend maturities.

New-money M&A issuance was relatively subdued this quarter as valuation mismatches between buyers and sellers persisted, while strong demand for credits continued to create an imbalance in favor of borrowers.

Refinancing and repricing activity was supported by tighter yields, with single-B euro term loan margins compressed into the mid-300bps range at points during the year [3]. In parallel, sponsors turned to dividend recapitalizations as an alternative source of liquidity in a challenging M&A environment. Loans financing dividend recaps rose to €17.9bn in 2025, from €10.5bn in 2024 [4].

As the year progressed, particularly through H2, the market became increasingly split, with lender appetite remaining skewed towards higher-quality credits. We saw strong issuers continue to access capital on attractive terms, while weaker credits faced greater execution risk.

Market sentiment shifted due in part to the Chapter 11 filing of First Brands, [5] prompting a reassessment of downside risk. There has been reduced tolerance for opportunistic repricings and a modest widening of spreads in November, before renewed activity in the first half of December [6].

In periods of low market sentiment, the private credit market either remained open or returned than the BSL market, reinforcing its role as a reliable source of capital during periods of volatility. European private credit had a record year, with total estimated volumes reaching €41.4bn [7]. Competition among private credit lenders and the BSL market intensified further, compressing margins which at points during the year reached 450bps for strong credits [8]. 

2026 outlook

The recent escalation of conflict across the Middle East has introduced a fresh layer of geopolitical risk to global markets. It remains too early to assess the duration of the conflict or its full implications for European debt markets.

European credit markets enter 2026 with ample liquidity, with the BSL market having a strong start to the year with higher volumes this January than it did a year ago[9] and a further tightening of yields.

Within private credit, the depth of dry powder supports continued deployment even if M&A volumes remain subdued. While we anticipate competition with banks and the BSL market to persist, private credit’s ability to offer greater certainty of execution and structural flexibility, particularly in periods of volatility, presents itself as a reliable source of capital.

Lenders will become ever more focused on the potential impact of AI through 2026[10] – businesses in Technology & Software, Financial Services and Professional Services will likely face more stringent diligence requirements as lenders seek to understand the potential impact of generative AI on their business models.

At the same time, we expect lenders to become more constructive on Industrial and ‘blue-collar’ focused businesses where the potential impact of AI is reduced. Similarly, Defense and energy-related Infrastructure are gaining prominence as geopolitical priorities and government spending patterns shift.

We anticipate an increase in M&A activity through 2026, as sponsors continue to feel pressure to return liquidity to LPs, and this new money activity will be welcomed by the BSL market. However, we expect volumes to remain skewed toward refinancings and extensions with selective acquisition financings rather than a broad-based resurgence. 

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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 January 2026 DC Advisory Lender Survey, subject to the limitations as described below.

The January 2026 DC Advisory Lender Survey: (DC Advisory’s independent survey of 99 European banks and direct lenders. which was completed in January 2026 and conducted across the UK, France, Germany, Austria, Switzerland, Spain, Belgium, the Netherlands, and Luxembourg (referred to herein as the “The January 2026 DC Advisory Lender Survey” or the “Survey”). Any such data, including league table data referenced herein are limited to the data provided by the Survey participants and are 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.