Direct lenders squared off 2023 with an impressive issuance volume as the fourth quarter housed both the highest number of deals and the largest volume of transactions of the year. A total of 660 deals were signed throughout 2023, marking a 20% year-on-year reduction.

Despite the decline, direct lending maintained a market share of 30% versus institutional loan and high yield bond activity – only slightly down from a near 40% share in 2022 – and further cemented the asset class as a mainstay of the leveraged capital market.

In a year marred by a severe lack of new money activity stemming from a weak auction pipeline, the total 2023 direct lending deal volume reached just over EUR 60bn. However, the volume of realised auctions processes picked up in 4Q23, leading to a brighter outlook for the entire leveraged debt market in 2024.

If this comes to pass, direct lenders are likely to face a new challenge in the coming year. Over the past two years, significant syndication risk and a narrowing price gap had aided issuers’ decisions to raise debt in the private credit market. However, as this risk tails off, lenders will have to compete in a time of tightening margins with the inherent risk premium attached to private credit.

Direct lending has now passed multiple tests with flying colours in which the capital markets have experienced famine. Perhaps this year the asset class will be tested amid a debt market feast.

Ares took first place in the overall European FY23 rankings table, having signed 62 deals to secure a 9% share of the market. Second place was a three-way tie between Eurazeo, Tikehau IM, and Goldman Sachs Private Capital with 37 deals apiece.

In the large-cap ranking, Goldman Sachs tied with Ares’ 33 deals, giving each a 20% market share. CVC rounds out the large-cap podium with 18 deals inked in 2023.

Barings pulled ahead to finish first in the mid-market rankings with 30 deals, followed closely by Ares’ 28 qualifying deals. Eurazeo placed third with 26 signed deals.

In the small-cap rankings, Fiduciam placed first with 31 deals, while Apera and Investec Private Debt came in second and third, respectively, with 24 and 14 qualifying deals.

Debtwire’s direct lender rankings highlight the key players in the private debt market. The report contains active direct lender fund rankings, along with market analysis.