The M3 broad measure of euro zone money supply declined in July for the first time since 2010. The Bank of England is"We think that in the next two quarters, financial conditions will deteriorate meaningfully," said Francesco Sandrini, head of multi-asset strategies at Amundi, Europe's largest asset manager.
Deals are "taking longer than they have traditionally", he said, adding Deloitte was seeing an "uptick" in private lenders demanding debt-for-equity swaps, the practice of taking ownership of a business when borrowers struggle to repay debt. Patrick Marshall, head of fixed income for private markets at Federated Hermes, anticipates tighter liquidity ahead.
Faisal Ramzan, a partner at law firm Proskauer Rose who advises private credit funds, said he was not seeing default. But, he added, in the past "three or four months" lenders were starting to "get closer" to companies with weakening prospects to "try and head off anything that's coming down the line".Private credit fund managers express caution about deploying funds in their 300 billion euro market.
Some industry insiders noted Europe's private lending market has not lived through a high interest rate environment.