Partner Aymen Mahmoud talks to LCD News about the European private credit market which appears to have come through the first third of 2022 unscathed as Europe’s broadly syndicated loan and bond markets struggle to return to normality following the shock from the war in Ukraine, and amid a vastly altered rate environment.

“With leverage levels steadily increasing, there has been a growth in junior debt whether on a second lien or holdco basis,” he says. “In particular the latter appears to be growing in popularity owing to the fact that it helps sponsors by providing stretched leverage but also allows direct lenders to make use of their special opportunities or junior capital funds, each of which has a higher ‘hurdle’ of returns which must be achieved in order to make an investment. This alignment of interests between lender and borrower is of the same type that has seen an increasing use of minority equity co-investment, and in many ways helps to drive a more functional market.”