European High Yield, Leveraged Loan, and Private Credit Report Q1 2026

AFME is delighted to circulate its European High Yield, Leveraged Loan, and Private Credit Report for the first quarter of 2026. The report provides detailed data and analysis on the issuance and credit performance for the high yield, leveraged loan and private credit markets.

Among the main findings of this report:

1. European leveraged debt markets (leveraged loans, direct lending, and high yield bonds) totalled €130bn in proceeds in Q1 2026, a decrease of 16.2% from €155.2bn in Q4 2025 and a decrease of 18.9% from €160.3bn in Q1 2025.

1. Direct Lending origination reached €26.4bn in Q1 2026, an increase of 39.6% year-on-year and a decline of 3.6% quarter-on-quarter.
1. LBOs (29%) and acquisitions (26%) represented the largest share of proceeds, while refinancing accounted for 24% of the total.

1. High Yield Bond issuance totalled €21.8bn in proceeds, a decline both from the previous quarter (-40.8%) and year-on-year (-25.3%).
1. Refinancing was the primary use of proceeds during Q1, accounting for 50% of total high yield issuance.

1. Leveraged loan origination stood at €81.8bn in Q1 2026, marking a decline of 10.1% from Q4 2025 and a 27.1% from Q1 2025.
1. 78% of leveraged loan issuance was used for refinancing, with an additional 4% for debt repayment.

1. Credit Quality: European high-yield bond defaults decreased in Q1 2026, with 10 defaults reported (down from 12 in Q4 2025). Most of these defaults were the result of distressed exchanges.
1. The S&P trailing 12-month speculative grade bond default rate declined from 4% in Q4 2025 to 3.3% in Q1 2026. Moody's reported a decline in default rates to 3.8% in Q1 2026, from 3.9% in Q4 2025.
2. According to KBRA DLD, the European direct lending default rate by count is expected to increase from 2% in 2025 to 2.25% in 2026, while the default rate by volume is expected to remain unchanged at 1%.

1. High Yield spreads increased during the quarter from 2.7% to 3.4% by the end of March.
1. Yields on private credit loan origination have shown a declining trend, with euro-denominated yields decreasing from 9.3% in Q1 2025 to 8% in Q1 2026.