Three to four more private credit collateralised loan obligations (CLOs) are expected to take place in Europe in 2025.
According to the annual European Leveraged Finance Survey by PitchBook LCD, European leveraged finance professionals are bullish on private credit in the year ahead.
43 per cent of the people surveyed said that they expect to see three to four new European private credit CLOs in the year ahead. 29 per cent predicted there would be more than five new European private credit CLO launches, while another 29 per cent expect to see one to two.
Earlier this year, Barings launched the first ever European mid-market private credit CLO at €380m (£314.15m).
Read more: Asset-backed finance: Riding the wave
The leveraged finance professionals also expect to see an uptick in M&A activity leading to more issuances, and an increase in allocations to both broadly syndicated loans and private credit.
38 per cent said they expect private credit allocations to increase in 2025, while 31 per cent believe LPs will maintain their current exposure. Another 31 per cent expect private credit allocations to decrease next year as LPs become more risk-averse.
Read more: Pension funds to increase private market allocations
Almost two thirds (66 per cent) said they expect credit spreads to get “moderately tighter” next year. Pitchbook noted that average spreads for single-B and unrated credits in the broadly syndicated loan market were 407 bps over the 30 days to 12 December 2024.
The survey’s respondents also predicted that the default rate could rise to between 2.5 and 2.99 per cent.
Geopolitical volatility was deemed likely to have the biggest impact on portfolio performance over the next six months.
Read more: A golden source of data
