-

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 BX 2026-LP3

NEW YORK--(BUSINESS WIRE)--KBRA announces the assignment of preliminary ratings to seven classes of BX 2026-LP3, a CMBS single-borrower securitization. The collateral for the transaction is a $1.56 billion floating rate, interest-only mortgage loan. The loan is expected to have an initial two-year term with three, one-year extension options and require monthly interest-only payments. The loan will be secured by the borrower’s fee simple interests in 69 primarily industrial assets. In total, the...

KBRA Assigns Preliminary Ratings to OBX 2026-AHC1 Trust

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 62 classes of mortgage pass-through notes from OBX 2026-AHC1 Trust, a prime agency-eligible RMBS transaction sponsored by Onslow Bay Financial LLC, that is fully originated and serviced by AmeriHome Mortgage Company, LLC (AmeriHome). This transaction is comprised of 692 residential mortgages with an aggregate unpaid principal balance (UPB) of approximately $349.3 million as of the April 1, 2026 cut-off date. The underlying collatera...

KBRA Assigns Preliminary Ratings to EFMT 2026-AE2

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 58 classes of mortgage-backed certificates from EFMT 2026-AE2. EFMT 2026-AE2 is a $349.0 million RMBS transaction, as of the cut-off date, sponsored by EFMT Sponsor LLC. The pool is secured entirely of first liens on non-owner occupied (NOO) investor properties (69.9%) and second homes (30.1%) underwritten to agency guidelines. The underlying pool is seasoned approximately three months and comprises 937 loans. All loans are originat...
Back to Newsroom