The bank came back to the table, and the terms moved toward the borrower.

Who financed Europe's sponsor-backed mid-market in the second quarter?

Both lender groups, and in different proportions from three months earlier. Houlihan Lokey's MidCapMonitor for the second quarter of 2026 counts 146 sponsor-backed unitranche financings closed across the UK, Germany, France, Spain, Benelux, Italy, the Alpine and the Nordic regions, 33 percent more than the 110 closed in the first quarter and 6 percent more than in the same quarter of 2025. With 256 deals in the first half, the year is running level with 2025, and the house reads the soft first quarter as seasonal rather than as a slowdown.

The recovery was not evenly spread, and neither was the lender behind it. The UK doubled its unitranche count to 48 and France rose 71 percent to 29, while Germany fell to 19 and Benelux to 16, each down 24 percent from a comparatively strong first quarter. Measured across all sponsor-backed senior and unitranche financings, debt funds took 68 percent of UK deals against 49 percent in the first quarter and 48 percent of French deals against 37 percent. In Germany their share fell to 49 percent from 68, and in Benelux to 53 percent from 66. Italy stayed the most fund-driven market at 71 percent, unchanged.

The smaller markets show the bank's return most clearly. In the Alpine region banks financed 58 percent of second-quarter transactions. In the Nordics banks arranged 46 percent, which took debt funds' first-half share to 60 percent against 93 percent across the whole of 2025. In Germany banks financed 20 of the 39 senior and unitranche deals in the quarter after a first quarter the house describes as clearly dominated by debt funds. Houlihan Lokey's own reading is that banks have become noticeably more assertive in defending their positions, most visibly in Germany, the Nordic region and the Alpine region.

Why does it matter to a borrower which lender group is winning?

Because the terms move when neither group is sure of the deal. Houlihan Lokey reports that debt funds remain eager to deploy capital and continue to compete aggressively on leverage, margins and fees, that banks have become more assertive at the same time, and, on the German market specifically, that the renewed competitive tension between the two lender groups is translating into attractive leverage, pricing and documentation terms for borrowers. That is the sentence in the print that an owner should read twice.

The condition attached to it matters as much. The same paragraph records both lender groups maintaining disciplined underwriting standards and a clear focus on high-quality assets in resilient sectors, and the house's European co-head of capital solutions describes a lot of capital competing for a relatively limited pool of high-quality assets, a dynamic the house expects to persist through the second half. The competition is real, and it is competition for a particular kind of borrower. A company that qualifies is being bid for. A company that does not is being declined by two lender groups instead of one.

The purpose mix shows which deals each group wants. Across the pan-European unitranche count, add-on acquisitions were 40 percent of second-quarter activity at 59 deals, new financings were 38 percent at 56 deals, the highest quarterly total of the past twelve months, and refinancings and dividend recapitalizations were the remaining 21 percent. In the UK, buyout financings rose to 37 percent of first-half activity from 32 percent a year earlier. In Germany, new financings led the second quarter at 38 percent of deals as primary processes returned. A fund lender's preferred deal is still the add-on inside a platform it already knows. The bank's return is showing up first in the new financing, where the borrower is new to everyone.

Ruben Schwagermann, Managing Director: "The best terms in a credit market are not set by the borrower's numbers alone. They are set by how many lenders believe they might lose the deal. A quarter in which banks take share back from funds in four markets while funds take share from banks in two is a quarter in which every lender in every market has that belief, and the document reflects it."

What does the yield gap between Europe and the United States say?

That the price of private credit is a supply story before it is a credit story. Houlihan Lokey's European subset of its Private Performing Credit Index shows an all-in implied yield of 9.73 percent at the end of the second quarter of 2026, up from 9.66 percent a quarter earlier. That is 281 basis points above the European Leveraged Loan Index at 6.92 percent, and 24 basis points below the full index at 9.97 percent, which predominantly comprises US private credit borrowers.

The house's explanation for the gap is not that European borrowers are safer. It is that spreads in European private credit continued to tighten, reflecting a divergent supply and demand dynamic relative to the US market, which it describes as facing continued redemption pressures. Two markets with the same lenders, often the same funds and the same loan documents, are pricing 24 basis points apart because in one of them the fund lenders are managing withdrawals from their own vehicles and in the other they are not.

For a borrower in Canada or the United States, the transatlantic figure is a control experiment. The North American fund lender that is quoting a wider margin this year is not doing so because the borrower changed. It is doing so because its own capital has become more expensive to hold, and the European print shows what that same lender quotes when it is not. A company that can bring a bank to the same table has the one lever that the European numbers say works.

What should an owner or a sponsor take from it?

Run the bank and the fund against each other, and know which one wants the deal you are actually doing. The MidCapMonitor's market-by-market swings say the two groups are not settled into fixed roles: banks financed more than half of German deals in the second quarter after financing far fewer in the first, and 46 percent of Nordic deals in a market they had all but left in 2025. A borrower who assumes the fund is the only bidder for a mid-market unitranche is assuming a market that stopped existing in April.

Match the lender to the purpose. The fund lender's share of add-on financings and its focus on buy-and-build say that a platform adding a bolt-on should expect its incumbent fund to compete hard for the incremental facility, and should let a bank price the same facility anyway. A new buyout, which was 37 percent of UK first-half activity and led the German second quarter at 38 percent, is where the bank has returned and where a sponsor should expect the widest set of quotes.

Read the exceptions as a warning about scale. Spain recorded 10 financings in the quarter, half its count a year earlier, with banks executing four deals against 16 in the same quarter of 2025. Italy completed 27 unitranche financings in the first half against 29 for the whole of 2025, in what the house calls a historically bank-driven landscape. In the smallest markets the swing runs both ways at once, and a company whose debt need falls below the print's 20 million euro threshold is not in the count at all. The competition that moves terms is competition for a deal large enough for both lender groups to want it.