European private credit at an inflection point

Private credit has been written off at regular intervals, often during periods of market stress, yet has consistently re-emerged larger and more strategically important. Industry research from the Alternative Credit Council now places the global market at approximately $3.5 trillion in assets under management, making it too significant to dismiss as a peripheral source of corporate funding. However, with scale comes greater scrutiny. The prevailing tone among Europe’s leading managers, allocators and advisers at this year’s Debtwire European Private Credit Conference was therefore measured rather than celebratory.

For businesses across the island of Ireland assessing their funding options, the implications are significant. Five themes were particularly prominent.

1. Capital is rotating to Europe and discipline is the differentiator

Capital is increasingly rotating from the mature and highly competitive US market towards a more fragmented, opportunity-rich European market, which now represents close to 30% of global private credit assets. That fragmentation is a key part of the attraction: complexity favours lenders with the discipline and capability to structure appropriately, rather than those competing primarily on price.

The counterpoint is that spreads remain compressed, with substantial capital seeking deployment over multi-year investment horizons. As the opening keynote, featuring strategists from the BlackRock Investment Institute and private debt leadership from Eurazeo, made clear, success will follow discipline, not speed.

2. AI is now a standing item in the credit memo

Artificial intelligence has moved beyond conference-panel novelty and is now a substantive underwriting consideration. Software, historically viewed as one of the most stable and predictable sectors within private credit portfolios, has become the principal test case. The reset panel that opened the day brought together direct lending and mid-market leaders from Ardian, Golub Capital and Pemberton Asset Management, alongside an allocator perspective from Cambridge Associates, to examine the implications.

This is not a wave of sudden “Kodak moments” displacing incumbents overnight. AI is better understood as an adoption cycle: disruptive, but gradual and uneven across sectors. The underwriting questions are now more precise.

• How durable are the revenue streams and contractual arrangements?
• Is the software genuinely embedded and mission-critical?
• Has the technology stack been effectively integrated, or merely acquired?

Deeply embedded products remain hard to replace and problems in performance can take years to show up. The financial impact of today’s deals may only become clear over the next decade.

3. Data centres are creating a new capital stack

Digital infrastructure was one of the dominant themes. The scale of required investment explains why: Morgan Stanley estimates a $1.5 trillion external financing gap against approximately $2.9 trillion of global data centre capital expenditure required through 2028, with private credit,  particularly asset-based finance, expected to provide more than $800 billion.

Financing these assets is becoming increasingly distinct from traditional real estate or infrastructure lending; a point emphasised by a panel spanning a global ratings agency and the infrastructure-credit arms of Macquarie Asset Management and Santander Asset Management. The credit analysis is different: this is not principally a loan-to-value exercise. Value is driven by contracts and cashflows, with contract renewal emerging as a central risk as hyperscaler commitments shorten from 20-year anchors towards 10-year terms with break clauses, and co-location arrangements shorten further. When combined with obsolescence risk where GPUs are financed within the asset, rising power and water requirements, and growing planning constraints, the sector requires specialist credit expertise rather than a generalist approach.

4. Distress is normalising and the 2027–28 refinancing wall looms

After a decade of rapid growth, a degree of stress is a natural feature of a maturing asset class. However, the underlying dynamic has changed. Where banks once absorbed a greater share of losses, borrowers are now more frequently refinancing opportunistically, often at par and at higher margins.

The more material shift is in workouts. As a restructuring panel, drawing on the credit platforms of Permira Credit and Bayside Capital, with advisory and legal perspectives from Rothschild & Co and Weil, outlined, the bilateral transactions of the 2021–22 vintages could often be restructured discreetly between one lender and one borrower. Today’s larger, multi-lender structures make consensus more difficult and outcomes less predictable as stress emerges, increasing the potential for creditor-on-creditor tension and, in some cases, loan-to-own strategies. The key consideration is the 2027–28 refinancing wall: borrowers that have not improved operationally or deleveraged by then are likely to face a less forgiving market. European mid-market default rates have not yet spiked, but the window to address refinancing risk is now.

5. The liquidity question is reshaping fund structures

With private equity holding periods extending, the pressure to return capital has become a defining issue for the industry. Where managers are unable to generate liquidity through exits, investors are increasingly turning to a rapidly growing secondaries market; a theme explored by leading secondaries specialists, who pointed to GP-led continuation vehicles as a likely driver of 2026 activity. Allocators are also becoming more selective, with a greater focus on senior secured exposure, defensive sectors and asset-backed strategies. Further innovation in continuation vehicles, NAV financing and asset-based finance is therefore likely as the market seeks to engineer liquidity through alternative routes. Specialty and asset-based finance has already overtaken direct lending as the most active area for new fund launches.

What this means for the island of Ireland

These themes have direct relevance for the local market.

Digital infrastructure is a particularly important Irish issue. Ireland is already a European data centre hub, with associated constraints around grid capacity, power availability and planning. As financing techniques migrate from the US, Irish sponsors may be able to access specialist capital if, and only if, they can present the contract-led, cashflow-based credit story this form of lending requires.

The energy and grid transition represents a material financing opportunity. The investment required to retrofit grids for renewable generation points to meaningful demand for structured, long-dated debt capital.

Mid-market borrowers should prepare now for the refinancing wall. Most corporate finance activity across the island of Ireland sits in the mid and lower-mid market — the segment where, as a dedicated mid-market panel noted, stress is now becoming more visible. The relative calm of today should be used to strengthen operating performance and balance sheets ahead of 2027–28. Lenders are increasingly prioritising resilient, cash-generative businesses, while applying closer scrutiny to discretionary and heavy-manufacturing exposures. The competitive landscape is also evolving, as European banks develop dual-track origination models and joint ventures with private credit funds.

A broader range of capital is available — but preparation matters. Private credit is no longer limited to senior direct lending. Asset-based finance, hybrid capital and other tailored structures are increasingly relevant for mid-market companies, family businesses and sponsors seeking flexibility.

This is where experienced advice becomes particularly valuable. A fragmented, fast-moving and increasingly sophisticated market is difficult for borrowers to navigate in isolation. A debt adviser provides a current view of who is lending, on what terms and with what appetite — insight that most borrowers, approaching the market only periodically, cannot replicate. The right adviser creates genuine competitive tension between funders, improving pricing and terms; translates the business into a credit story lenders can underwrite; structures financing for flexibility and headroom rather than simply the lowest headline margin; and helps borrowers address refinancing pressure well before it becomes urgent. In a market where the gap between strong and weak outcomes is widening, that support can be the difference between accepting available capital and securing the right capital on the right terms.

The overarching takeaway was of a market entering a more mature phase: more sophisticated, more differentiated and more alert to its own risks. For businesses across the island of Ireland, this creates both a wider range of financing options and a higher bar for how funding requirements are framed. The capital is available. The discipline and the advice required to access it on the right terms will be the differentiator.

This article reflects general market themes and the author’s own analysis; it does not attribute views to any named participant or firm.