Private credit could play a greater role in Europe’s defence build-out, according to a new report by Moody’s Ratings.
It said that major European defence firms are increasing investments, but said that barriers in European capital markets could still limit private investment into smaller firms that form the backbone of the industry.
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“Private credit is therefore likely to play a bigger role among the sector’s smaller players in the coming years because it offers more flexible and longer-term financing solutions,” it said.
“Private credit’s more flexible, bespoke and patient financing (senior loans, mezzanine debt and venture debt) could prove more suitable for the specific needs of a defence company like funding a new production line or investing in R&D where the returns might not be immediate.”
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As an example, it highlighted that Tikehau Capital and three insurers recently launched an initial €150m (£130m) fund focused on defence, cybersecurity and European security that includes a 30 per cent allocation to private debt.
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