European private credit rebounds to levels last seen in mid-2022, says Deloitte

LONDON (Reuters) – European private lending activity has rebounded to levels last seen in mid-2022, new data from Deloitte showed on Tuesday, in a sign investors are piling in to risky corporate debt as they anticipate European Central Bank interest rate cuts this year.

Private debt funds, which mostly lend at high interest rates to indebted companies backed by buyout houses, extended 189 loans in the final quarter of 2023, the accounting group said, the most since the second quarter of 2022, just before the ECB first raised interest rates.

Andrew Cruickshank, a Deloitte director and the study’s author, said private debt deal volumes were likely still rising this year after credit markets opened up to riskier borrowers, even as the ECB keeps rates at record highs.

The rapid loosening of credit conditions ahead of any move by the ECB to cut rates has unsettled some of the central bank’s policymakers.

(Reporting by Naomi Rovnick; Editing by Dhara Ranasinghe and Sharon Singleton)