European private credit pricing overtakes US as redemption pressures reshape lending market

Private credit borrowers are increasingly finding more competitive financing terms in Europe than in the US, as intense competition among European lenders contrasts with a US market constrained by elevated redemption requests and weaker capital deployment, according to a report by Bloomberg.

The report cites data from Houlihan Lokey’s Private Credit DataBank as showing that European direct lending loans are now pricing around four basis points tighter than comparable US loans, marking a significant reversal from the historical trend in which European financings typically carried a premium of around 22 basis points.

The shift reflects diverging market dynamics on either side of the Atlantic.

While merger and acquisition activity remains subdued in both regions, European private credit managers continue to compete aggressively for a limited pipeline of sponsor-backed transactions. In contrast, many US direct lenders have become more cautious in deploying capital as retail-focused private credit vehicles manage elevated investor redemption requests.

The US private credit market has faced sustained liquidity pressures in 2026, with several large managers imposing redemption limits on semi-liquid funds following record withdrawal requests. The need to preserve liquidity has reduced appetite for new lending and contributed to wider spreads.

By comparison, institutional demand for European private credit remains robust.

Speaking earlier this year, Ares Management chief executive Michael Arougheti said geopolitical developments were increasing investor interest in the eurozone, supporting fundraising and investment activity across European private markets.

The pricing advantage for borrowers has become particularly evident in sponsor-backed transactions.

A consortium including CVC Capital Partners, Goldman Sachs and Apollo Global Management recently provided a €425m unitranche financing to laboratory services provider GBA Group following its acquisition by Bridgepoint. The loan priced at around 475 basis points over Euribor.

In the US, a comparable financing arranged by Blue Owl Capital and Blackstone for Caris Life Sciences earlier this year was priced at approximately 500 basis points over SOFR.

Competition has also intensified between private credit providers and the broadly syndicated loan market. An €880m leveraged loan backing Swedish pharmaceutical company Recipharm recently tightened significantly during syndication, highlighting lenders’ willingness to offer increasingly attractive terms for high-quality borrowers.

At the same time, private credit managers are becoming more selective about sector exposure.

Software, previously one of the largest sources of direct lending transactions, has become a less favoured segment as lenders reassess the potential impact of artificial intelligence on business models and enterprise valuations. Market participants say capital is increasingly being directed towards sectors viewed as more resilient, while software financings now receive greater scrutiny.

Despite slower overall deal flow, activity continues across the market. Fortress Investment Group is preparing to acquire up to $750m of loans through a forward-flow agreement with Spreo Capital, while Blackstone recently led a financing to support Harvest Partners’ acquisition of Integra Testing Services.

On the fundraising front, GCM Grosvenor has raised $1.2bn for a dedicated credit secondaries strategy, while Tikehau Capital closed the sixth vintage of its European Direct Lending strategy at €5.2 billion, underlining continued institutional demand for private credit despite the challenging market backdrop.