Insights into European Direct Lending with Mike Dennis

·22 min·2 clips

Mike Dennis, co-head of Europe's largest credit fund with €70 billion AUM, discusses whether the syndicated market's return spells the end of private credit's golden age.

The episode begins with host Marina Irklienko introducing Mike Dennis, co-head of European credit at Ares, which has nearly €70 billion in assets under management. Dennis immediately addresses whether the syndicated loan market's reopening in 2024 signals the end of private credit's golden age, dismissing the term and emphasizing direct lending's middle market focus. He explains that direct lending primarily serves companies with €10-75 million EBITDA, a segment not targeted by syndicated loans. The discussion pivots to fundraising, where Dennis notes challenges driven by LP cash flow issues from slow M&A realizations, though he maintains private credit's attractiveness due to risk-adjusted returns and capital preservation. He analyzes spread compression as a short-term phenomenon tied to muted M&A activity and excess liquidity, predicting medium-term health from a supply-demand mismatch. Dennis highlights market bifurcation, with scale advantages leading to consolidation and exits like Fidelity's, while barriers to scale remain high. He touches on club deals, noting they are not Ares's preference due to risk-adjusted returns and LP diversification needs. The conversation explores a refinanced €3.3 billion unit tranche deal, with Dennis viewing it as a natural capital structure evolution. Future growth areas include credit secondaries, NAV financing, and special opportunities for companies with mismatched capital structures. Dennis expresses optimism for the second half of 2024, citing peaked interest rates and potential M&A recovery. The episode concludes with a personal anecdote about his skeleton racing experience at Lillehammer.

As heard by us

A clear, measured read on European direct lending as syndicated markets reopen and scale gets harder to copy.

European direct lending is set against the market's swing back toward syndicated finance, with Mike Dennis weighing what some 13 billion of deals moving from unitranche to the broadly syndicated market really signals.

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Why you'd press play

You want the direct-lending story after roughly 13 billion euros of Q1 unitranche deals moved back toward broadly syndicated markets.

Read the full recommendation in PlayNext →

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