What began as an emergency measure during the 2022 bond market freeze is edging towards a structural shift, according to four market participants polled by this news service.

Private credit funds, awash with record dry powder and starved of deal flow from private equity (PE) firms, are now courting listed companies once considered beyond their reach, participants noted.

“Many credit funds are definitely focusing some strategies toward non-PE-owned businesses now,” said Alex Griffith, private credit partner at Proskauer. “There’s so much competition for sponsor-backed M&A and at the moment just not enough assets to go around. Moving toward more founder-owned or even public companies is a new world of opportunity.”

The attraction is clear: deployment. The challenge, some caution, is everything else. This ranges from pricing, disclosure and governance to a culture clash between private credit control and public-market transparency.

When certainty trumps cost

For many borrowers, private credit is still an expensive funding option.

“Private credit is not trying to beat the investment grade market on price, it plays a different game,” said Aymen Mahmoud, European head of finance at McDermott Will & Schulte. “When access, certainty or discretion matter more than a few basis points, private credit comes into its own.”

That dynamic explains why the model first took hold when volatility spiked in 2022.

“Private credit steps into the spotlight when the public markets seize up,” Mahmoud added. “When volatility rises, speed and certainty start to matter more than the absolute cost of funds.”

Private credit fund managers are raising capital and broadening mandates, while experimenting with insurer and pension money to gradually lower their cost of capital, a step toward narrowing, though not matching, investment-grade pricing, he said.

“But that is a gradual shift,” Mahmoud noted. “The real advantage remains the ability to deliver tailored, relationship-driven capital when the public markets are either closed, inflexible or subject to undesirable volatility.”

Mindset problem

If the cost differential is one barrier, psychology may be the bigger one. One Paris-based debt advisory executive called it a “mindset issue, not a product issue.”

“Some funds have public market muscle memory, the rest get hives when you say ‘minority shareholder’ and ‘continuous disclosure’” the executive said. “The real blocker in take-privates isn’t the toolkit; it’s reputational risk and stage fright.”

While some investors such as Ardian, Eurazeo and PAI are comfortable operating in listed environments, most private equity sponsors and credit managers remain uneasy with collective decision making and public scrutiny. The preference for control runs deep.

Proskauer’s Griffith agreed that the cultural gap outweighs technical ones.

“Borrowers used to investment grade terms expect a larger degree of operational freedom, and perhaps even an ability to make unrestricted dividends and the ability to run the business,” he said. “Private credit lenders are used to a broader set of control. That’s the gap.”

Legal and structural friction

The gap widens in execution. Lending to a public limited company (PLC) means managing wall crossings, cleansing and ongoing disclosure obligations under the Market Abuse Regulation (MAR).

“It’s a more painful process to get the deal done because, unlike with private equity, no one has packaged the diligence and financial modelling for you,” noted Griffith.

Public borrowers also expect light documentation.

“Investment grade debt from banks comes with very limited controls,” Griffith added. “Private credit documentation is quite a bit more restrictive.”

Some lenders are experimenting with hybrid solutions, however.

“We’ve already seen leveraged finance style agreements where half the covenants fall away automatically if the borrower lists,” said Griffith. “To a certain degree lenders accepted that because they assumed no listed company would use private credit [as] it was too expensive. If funds can narrow the pricing gap and relax control, they could unlock a huge market.”

Where private credit fits

For now, private-credit involvement in public transactions remains situational. According to the Paris-based debt advisory executive, funds typically appear in three contexts:

• Minority buyouts and take-privates, when founders need liquidity to delist but lack full control
• Cash-outs alongside a new sponsor
• Aggressive acquisition plans that depress ratios and deter banks

“Private debt is pricier than banks and that’s fine,” the same source said. “You pay for speed, bespoke covenants and real flexibility. Banks ask for clean ratios; private credit lets you live with messy ones while you build.”

The executive also downplayed long-cited French obstacles such as the 95% squeeze-out and tax-integration thresholds.

“Frankly, that’s a false debate,” said the executive. “If the deal’s well-conceived, interest deductibility is icing, not the cake.”

Investor comfort

For limited partners (LPs) in PE funds, lending to listed companies is viewed less as a risk leap and more as diversification.

“Lending to public companies can offer diversification without necessarily increasing risk,” said Mahmoud. “Insurers and pension funds are already seeing value in that middle ground; it allows them to commit meaningful sums without straying too far from their risk comfort zone.”

Scale is also becoming decisive.

“Large platforms win because they smooth the ride,” the Paris-based debt advisory executive said. “Smaller funds struggle to promise that stability.”

How far can pricing stretch?

The economic gulf with the investment-grade market remains the most obvious constraint.

“Private credit is still the more expensive option for public companies,” said one finance lawyer. “They’ll keep turning to the IG market unless a bespoke situation prevents it.”

Even with cheaper insurance capital, lawyers doubt private credit can sustainably compete on spread alone.

“Even the big managers with insurance money still need higher returns than IG markets can offer,” Griffith noted.

That keeps private credit’s advantage anchored in situational demand rather than price, speed, certainty and discretion.

“The premium that comes with private credit is really the price of control,” Mahmoud noted.

The road ahead

Structurally, practitioners see progress. Hybrid and holdco instruments allow private lenders to sit alongside existing bond and bank facilities.

Legally, the UK remains the testing ground, and “by far the most user-friendly jurisdiction for creditors in Europe,” said Griffith.

Continental Europe’s creditor-protection regimes continue to limit secured lending to listed entities, though advisers are increasingly using Luxembourg intermediaries to bridge those gaps.

Still, most agree the trend has moved beyond opportunism.

“It’s a long-term evolution,” said Griffith. “It feels like funds come up with new strategies every six months, always trying to find new pockets for deployment, new areas in Europe where they can deploy at a good price.”

Or, as the Paris-based debt advisory executive summed it up, “the right price is whatever the borrower is willing to pay for certainty.”