Every facility has a maturity date, and the best time to refinance is well before it becomes urgent. In Europe that lead time matters more than in most markets, because a mid-market group often borrows across several countries, each with its own rules on security, guarantees and documentation. A refinancing that starts late tends to be priced by the calendar rather than by the business.
The market in late 2026
Conditions have tightened. The European Central Bank raised its deposit facility rate by 25 basis points to 2.50 percent in September 2026, and markets have priced a further rise in six-month EURIBOR into the end of the year. Carlsquare's review of the third quarter found refinancing volumes in the European leveraged loan market down almost 70 percent on the previous quarter to 5.5 billion euros, the lowest since early 2023, as issuers waited out wider spreads. Average single-B spreads widened 25 basis points to E+362.
Direct lenders were more active. Carlsquare estimated European direct lending at 9.6 billion euros across 36 transactions in the quarter, the strongest since late 2025, with an average spread of 526 basis points so far in 2026. Banks remain the main providers of larger, standardised facilities such as asset-based lines, while direct lenders are winning deals where speed, flexibility or complexity matter.
For a mid-market borrower the message is mixed: money is available, but at a higher base rate and with lenders more selective about credit quality.
Banks or direct lenders?
European mid-market companies have traditionally refinanced with their house banks, often through a club of two or three relationship lenders. That is usually the cheapest route for a company with stable earnings and moderate leverage. Bank facilities typically include a revolving credit facility and an amortising term loan, with maintenance covenants and a close relationship with local relationship managers.
Direct lenders, many of them pan-European funds, offer larger single tickets, unitranche structures, lighter amortization and more tolerance for leverage or complexity. They cost more, and their documentation and reporting requirements can be heavier. They are often the answer when a refinancing is combined with an acquisition, a dividend to shareholders or a change in the business that a bank club will not support.
Many refinancings end up with both: a bank revolving facility, often ranking ahead as a super senior facility, alongside a direct lender's term loan.
What makes European refinancings slower
Several jurisdictions
Each country where the group has material assets or subsidiaries usually needs its own security documents and local legal opinions. Some security, such as share pledges and account pledges, is straightforward. Other assets, like receivables or inventory in certain jurisdictions, take more work or cost more to secure.
Guarantee limitations
Many European countries restrict how far a subsidiary can guarantee or secure the debts of its parent or sister companies, through rules on corporate benefit, capital maintenance and financial assistance. Lenders accept limitation language as a result, and the value of each guarantor's support has to be worked out country by country. It affects how much a lender is willing to lend against the group.
Currency and hedging
Groups earning in sterling, Swiss francs, Nordic currencies or zloty alongside euros need to decide which currencies to borrow in and how to hedge the mismatch. The answer affects both the base rate and the covenant headroom.
Existing lenders
Your current lenders' consent is needed for anything short of full repayment, and the prepayment terms in the existing facility, including any break costs on fixed-rate pieces, need to be built into the comparison.
A refinancing timeline
- Eighteen to twelve months before maturity: review the facility against your business plan, decide what the new financing needs to do and prepare the numbers.
- Twelve to nine months before: prepare the credit package, including forecasts, a group structure chart and an asset and guarantor map by country.
- Nine to six months before: approach a shortlist of banks and direct lenders, receive indicative terms and compare them side by side.
- Six to three months before: agree the term sheet, complete due diligence and negotiate documentation in each jurisdiction.
- Three months before: sign, satisfy conditions precedent and repay the existing facility.
Starting early also gives you a fallback. If the market moves against you, an amend and extend with existing lenders is far easier to negotiate when the maturity is still a year away.
What lenders look at in a European refinancing
A refinancing is underwritten like a new loan, whatever the history with your current lenders. Expect a new lender to focus on four things.
The quality of earnings. Lenders want EBITDA they can rely on, with adjustments explained and supported. If the group has grown through acquisitions, they will look closely at how much of the earnings are organic and how integration costs have been treated. A recent financial due diligence report, even a light one, can shorten the process considerably.
Cash conversion. European mid-market lenders pay close attention to how much of EBITDA turns into cash after working capital, capex, tax and lease payments. Businesses with heavy capex or seasonal working capital swings should show this clearly, with monthly cash flow for at least the last two years.
Where the value sits. Because guarantees and security vary by country, lenders want to know which entities generate the earnings and hold the assets. A group whose profits sit in a country with strict guarantee limitations may need a different structure, or more equity, than one whose earnings are concentrated in a jurisdiction where security is easy to take.
The plan for the next facility. A refinancing that simply replaces old debt is easy to explain. One that also funds acquisitions, capex or a distribution needs a clear plan showing how leverage will come down over the life of the loan.
Preparing these points before you approach lenders lets you control the story and avoid the delay of answering the same questions lender by lender.
Pricing beyond the margin
When comparing offers, look past the margin. Upfront fees, commitment fees on undrawn amounts, prepayment terms, hedging costs and the cost of legal work in each jurisdiction can move the true cost of a facility by more than the difference in headline margin between two lenders. A side-by-side comparison on an all-in basis, over the period you actually expect to keep the facility, gives a much clearer answer.
Kenward Partners works with banks and direct lenders across Europe. We prepare the credit package, map security and guarantees by country with your advisers, and run a competitive process so the terms reflect your business rather than your maturity date.
