Private Credit

Europe’s Compelling Private Debt Opportunity

May 2023 – 3 min read

In this Q&A, Adam Wheeler discusses the potential for attractive returns in European private credit, despite the slowdown in M&A activity.

How would you describe the current private credit environment and the opportunities being created by volatility?

We are definitely seeing the impact of higher interest rates on the private credit market. We have seen reduced leverage levels, and the overall return profile in the market is probably the highest we have seen in decades. Spreads have widened by at least 100 basis points from where they were 18 months ago. While we have seen a slight reduction in enterprise values, there is still a significant amount of eq- uity cushion behind us. As a consequence, the asset class looks very attractive on an absolute return basis. These rates are probably unsustainable in the long term, but for the rest of 2023 and into 2024, the opportunity set will likely deliver returns that are fairly consistent with what we are seeing today.

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Adam Wheeler

Co-Head of Global Private Finance

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