Study 7: A European Version of the PPCI

The Private Performing Credit Index contains loans with base rates other than SOFR. We have isolated the European base rate borrowings and calculated the weighted average yield with the same methodology as the PPCI. In addition, we examined metrics such as spread, price, and relationship to Morningstar’s European Leveraged Loan Index (ELLI), which is composed of broadly syndicated European base rate borrowings.

The European subset of the PPCI illustrates that the all-in yields for European private credit are currently 186 bps higher than the yields on the European Leveraged Loan Index and 45 bps lower than the PPCI, which predominately comprises U.S. private credit market borrowers.⁽¹⁾

⁽¹⁾ In future Studies, we may calculate other subsets of the PPCI.

Spreads and Prices

While the European private credit market is still significantly smaller in size and less mature than the North American private credit market, the chart above shows that the private credit market in Europe has provided a persistent yield advantage over the broadly syndicated European market. The charts below from the European PPCI illustrate that European private credit spreads and price trends have been broadly similar to those in the U.S. private credit market. Spreads are the difference between the prevailing at-market yield and the base rate.

Comparison Between Private Credit Markets and Broadly Syndicated Loan Markets

Yields in the European subset of the PPCI are currently 45 bps lower than the USD-majority PPCI. The overall difference can be attributed to the lower base rate environment in Europe, which results in overall lower yields and similar spreads. In the broadly syndicated market, the ELLI is 75 bps lower than the USD-majority Leveraged Loan 100 (LL100); both indices comprise broadly syndicated loans. The LL100 is an index published by S&P Global.