Navigating Today’s Credit Landscape with David Hirschmann

In “Industry Insights: Exclusive Interviews,” we sit down with influential leaders and seasoned experts for in-depth conversations about today’s rapidly changing market. Each episode provides clear, accessible perspectives on emerging trends and market dynamics. They break down what these trends mean for businesses, professionals, and decision-makers.

The debut episode of Industry Insights: Exclusive Interviews takes an in-depth look at European credit markets with David Hirschmann, Head of Credit Strategy at Permira. Host Maryna Irkliyenko and Hirschmann discuss the evolving private credit landscape, focusing on mid-market opportunities, market dynamics, and future trends.

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The European Mid-Market Focus

Permira Credit has carved out a niche in the European mid-market, managing €16 billion in assets and focusing on companies with €50-100 million EBITDA. Hirschmann highlights how mid-market transactions provide better risk-adjusted returns and stronger downside protection. They also offer more attractive investment profiles compared to large-cap deals. This deliberate strategy leverages Permira’s private equity expertise for sector-specific insights while optimizing long-term returns for investors.

Market Shifts and Competitive Pressures

Hirschmann also addresses the significant changes in credit markets throughout 2024. While the reopening of the syndicated loan market has impacted large-cap direct lending, mid-market firms have remained largely insulated due to size constraints. The real competition arises from private debt funds accumulating excess capital amidst reduced deal flow. This situation leads to pricing compression with mid-market deals averaging 550-600 basis points over base rates.

Club Deals and Fundraising

Another growing trend is the rise of club deals in the mid-market, driven by larger transaction sizes and private equity sponsors seeking to mitigate risk through multiple lender structures. Hirschmann also notes a healthier fundraising landscape compared to the challenges of 2022-2023. This improvement is thanks to stabilizing inflation, improving liquidity, and expectations of gradual base rate reductions over the next 12-24 months.

Evolving Competitive Landscape

The European direct lending market continues to grow, but it remains concentrated among established players. High barriers for new entrants, institutional preference for trusted relationships, and the need for long track records have limited new competition. Hirschmann emphasizes how team stability and performance consistency remain critical differentiators for attracting capital.

Future Outlook

Looking ahead, Hirschmann anticipates base rates stabilizing at 2-3% over time. They are moving away from the zero or negative rates of the past decade. Predictability in monetary policy will be essential for investment decision-making and long-term growth in the credit markets.

The episode concludes with a personal note, as Hirschmann shares his role as a trustee for City Harvest, a London-based charity redistributing food waste to those in need. His involvement reflects both Permira’s and his personal dedication to social responsibility.

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Produced and edited by two-time Emmy Award-winning producer Tanya Hubbard.