European private credit lending surged to a record €63.2 billion (£54.1 billion) in the first half of 2026 as private equity firms increasingly refinanced portfolio companies amid a slowdown in mergers, acquisitions and exits.
The latest data from analytics platform Debtwire shows that direct lending across Europe jumped from about €40 billion in the same period last year, with refinancing activity accounting for a significant share of the increase.
The surge was concentrated in the first quarter, when private credit firms completed €34.8 billion in lending as private equity-backed companies sought to extend debt maturities while exit opportunities remained limited.
Patrick Costello, EMEA private credit analyst at Debtwire, said the lack of exit prospects for private equity-backed companies was a major reason sponsors and lenders were pushing maturities out through refinancing. He expects refinancing activity to remain elevated through the second half of 2026 and into 2027 if mergers and acquisitions activity does not recover.
Private Credit Lending Falls in Second Quarter
Despite the record first-half figure, European private credit lending slowed sharply in the second quarter. Direct lending fell 25% year-on-year to €28.4 billion, reflecting weaker M&A activity and a decline in borrowing among large companies.
Large-cap borrowers increasingly turned to public debt markets, where financing costs were generally cheaper than those offered by private credit funds.
“It’s likely many large-cap borrowers opted to raise debt financing on the public markets rather than in the private credit space, where pricing tends to be more expensive,” Costello said.
The shift has forced private credit firms to focus more heavily on smaller and mid-market transactions, where competition from public bond markets is less intense.
Private Credit Market Reshaped by M&A Slowdown
Private credit has expanded rapidly in recent years as traditional banks have become more selective in lending to higher-risk businesses, while borrowers have increasingly valued the speed and flexibility offered by private lenders.
The slowdown in private equity exits, however, is changing the nature of demand as instead of financing acquisitions and other new deals, lenders are increasingly providing capital to help private equity-backed companies refinance existing debt and extend maturities.
If M&A activity remains subdued, private equity firms facing maturing debt could continue to provide private credit managers with a steady stream of refinancing opportunities into 2027.
