AFME Q3 2025 European High Yield, Leveraged Loan, and Private Credit Report

AFME is delighted to introduce new Private Credit data into its Leveraged Finance report, starting from the third quarter of 2025.  

 

In response to the evolving landscape of Private Credit, we have added into this publication fresh insights on the size, market pricing, covenant structure, and credit quality trends of loans originated by private credit funds. These trends are compared with our traditional content with the evolution of high yield bonds and leveraged loans. 

 

Private credit and its associated risks have attracted growing attention, yet reliable data to assess the market’s scale remains limited. This quarterly report, by incorporating new private credit data, aims to support stakeholders in regularly forming a more informed view of its evolution. 

  

Among the main findings of this report: 

 

1. European leveraged debt markets issuance (leveraged loans, direct lending, and high yield bonds) totalled €147bn in proceeds in Q3 2025, a 61% increase from €91bn in Q3 2024 but a 11% decrease from €166bn in Q2 2025.  

 

1. Direct lending loan origination reached €28bn in Q3 2025, an increase of 81% year-on-year according to Octus.
   1. By use of  proceeds, acquisitions (32%) and LBOs (28%) represented the largest share of proceeds in the first three quarters of 2025, while refinancing accounted for 22% of the total.
   2. In Q3 2025, 28% of the total deals were ESG-compliant, a decline of 15.2% from the previous quarter and of 20% from Q3 2024. 

 

1. High Yield Bond issuance totalled €33bn in proceeds, showing a significant decline (-32.2%) from the previous quarter which was the third-largest value issued on records, and almost no change (-0.06%) year-on-year.
   1. Refinancing was the primary use of proceeds during Q3, accounting for 62.3% of total high yield issuance.
   2. Three sectors accounted for 57.5% of the high yield market by outstanding volume: Financials, Consumer Discretionary, and Communications. 

 

1. Leveraged loan origination stood at €85.6bn in Q3 2025, a 2% decline from Q2 2025 and a strong increase (102.5%) year-on-year.
   1. In the first 3 quarters of 2025, 64% of leveraged loan issuance was used for refinancing, with an additional 9% for debt repayment. Acquisitions and LBOs together accounted for almost 13% of total proceeds.
   2. The Computers & Electronics sector led Q3 leveraged loan issuance with a bit more than €15bn in volume, followed by Professional Services (almost €14bn) and Healthcare (€11bn). 

 

1. Credit Quality:
   1. Speculative-grade bond default rates have remained at historic averages during the year, ending the quarter at 3.7% (S&P) and at 3.25% (Moody’s, as of August 2025).
   2. According to KBRA DLD, Direct lending default rates are expected to increase by the end of the year. In 2024, the default rate by count was 1%, while the trailing twelve month (TTM) default rate as of June 2025 stood at 1.7% with forecasts indicating a rise to 2.25% by the end of the year. In terms of volume, the default rate is likely to increase from 0.4% in 2024, with the TTM rate as of June at 0.5%, to 1.25% by the end of 2025.
   3. According to Fitch, the European leveraged loan trailing 12 months (TTM) default rate calculated by volume stood at 1.7% in June, while calculated by count at 3.7%, both marking a decrease from December 2024. 

 

1. High Yield spreads tightened during the quarter from 3.1% to 2.7% by the end of September.
   1. Yields on private credit loan origination have shown a declining trend, with euro-denominated yields decreasing from 10.7% in Q2 2024 to 8.3% in Q2 2025.