-

KBRA Releases Research – Private Credit: Potential for European MM and Direct Lending CLOs

LONDON--(BUSINESS WIRE)--KBRA UK (KBRA) releases a report on the potential for European middle market (MM) and direct lending collateralised loan obligations (CLO). KBRA has observed increasing momentum in the formation of a European middle market, including CLOs and other direct lending vehicles, amid the rapid expansion of global private credit. The concept of whether 2024 will see the emergence of this asset class in Europe remains in its infancy; however, there is visibility on a handful of potential concentrated loan portfolios to European MM companies. In some cases, loans have been made to smaller corporate obligors, underwritten based on metrics tied to revenues rather than more traditional lending metrics, such as EBITDA. In addition, European private equity and alternative credit managers continue to raise more direct lending funds dedicated towards this segment of the market. Despite diversification and regional differences that pose challenges for portfolio construction, it is more a question of when (rather than if) Europe will see its first MM CLO.

In this report, we discuss the evolution and current state of the European private credit market, compare broadly syndicated loan and MM CLOs, and explore other types of lending facilities to private debt portfolios. KBRA has a unique insight into the landscape and trends in private credit. A comprehensive list of KBRA publications on private credit and structured credit can be found in the report appendix.

Key Takeaways

  • Growth in global private credit provides a supportive backdrop for European MM CLOs. The European private credit market represents 27% of the USD1.7 trillion global private credit market, according to Preqin. Europe’s expansion into this market could be further supported with the use of public capital market technology.
  • European MM CLOs face regional and concentration challenges, as the loans pools contain a limited number of issuers.
  • Idiosyncrasies of MM CLO portfolios drive structural differences, with limited collateral hedging and payment-in-kind loans within a pool.
  • Alternatives to CLOs offer further opportunities for investors to participate in the expansion of private credit.

Click here to view the report.

Related Publications

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Contacts

Gabriele Gramazio, Senior Director
+44 20 8148 1001
gabriele.gramazio@kbra.com

Sean Malone, CFA, Managing Director
+1 646-731-2436
sean.malone@kbra.com

Gordon Kerr, Head of European Research
+44 20 8148 1020
gordon.kerr@kbra.com

Business Development

Mauricio Noé, Co-Head of Europe
+44 20 8148 1010
mauricio.noe@kbra.com

Miten Amin, Managing Director
+44 20 8148 1002
miten.amin@kbra.com

KBRA UK

Details
Headquarters: New York City, New York
CEO: Jim Nadler
Employees: 400+
Organization: PRI

Release Versions

Contacts

Gabriele Gramazio, Senior Director
+44 20 8148 1001
gabriele.gramazio@kbra.com

Sean Malone, CFA, Managing Director
+1 646-731-2436
sean.malone@kbra.com

Gordon Kerr, Head of European Research
+44 20 8148 1020
gordon.kerr@kbra.com

Business Development

Mauricio Noé, Co-Head of Europe
+44 20 8148 1010
mauricio.noe@kbra.com

Miten Amin, Managing Director
+44 20 8148 1002
miten.amin@kbra.com

More News From KBRA UK

KBRA Assigns Preliminary Ratings to GS Mortgage-Backed Securities Trust 2026-NQM1 (GSMBS 2026-NQM1)

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 10 classes of mortgage-backed certificates from GS Mortgage-Backed Securities Trust 2026-NQM1 (GSMBS 2026-NQM1). GS Mortgage-Backed Securities Trust 2026-NQM1 (GSMBS 2026-NQM1), is a $410.6 million RMBS transaction sponsored by Goldman Sachs Mortgage Company (Goldman Sachs). The transaction is collateralized by a pool of 1,076 fixed-rate residential mortgages (FRM; 100.0%), and includes a meaningful concentration of collateral that...

KBRA Assigns AA Rating to Chicago Transit Authority Sales Tax Bonds Series 2026A (Second Lien) and 2026B (First Lien); Outlook Positive

NEW YORK--(BUSINESS WIRE)--KBRA assigns a long-term rating of AA to the Chicago Transit Authority, IL's (CTA) Second Lien Sales Tax Receipts Revenue Project and Refunding Bonds, Series 2026A and Sales Tax Receipts Revenue Refunding Bonds, Series 2026B. Concurrently, KBRA affirms the AA rating on the CTA's outstanding Sales Tax Receipts Revenue Bonds (First Lien) and Second Lien Sales Tax Receipts Revenue Bonds. The Outlook for both liens remains Positive. Proceeds of the Series 2026A Bonds will...

KBRA Assigns Preliminary Ratings to BBCMS 2026-5C40

NEW YORK--(BUSINESS WIRE)--KBRA is pleased to announce the assignment of preliminary ratings to 13 classes of BBCMS 2026-5C40, a $834.4 million CMBS conduit transaction collateralized by 44 commercial mortgage loans secured by 59 properties. The collateral properties are located throughout 25 MSAs, of which the three largest are Los Angeles (13.7%), New York (12.9%) and Las Vegas (9.0%). The pool has exposure to all major property types, with five types representing more than 10.0% of the pool...
Back to Newsroom