Hybrid financing has held up well going into September 2026. Demand keeps growing for flexible instruments that sit between senior debt and equity. Interest rates have settled at levels higher than most of the past decade, and in that context mezzanine debt, venture debt and convertible bonds have become a practical way for companies to work on their capital structure without taking heavy dilution up front.
1. France: private debt rebounds
The French private debt market, which underpins much of hybrid financing, rebounded sharply in 2025.
2025 key figures (source: France Invest / Deloitte, March 2026)
| Indicator | 2025 | 2024 | Change |
|---|---|---|---|
| Fundraising | €14.8bn | €8.5bn | +74% |
| Investments | €15.9bn | €12.8bn | +25% |
| Number of deals | 379 | 317 | +20% |
| Average deal size | €43m | ~€40m | Slightly up |
| Share of refinancings | 42% (by amount) | 23% | +19 pts |
Notable points:
- 14 funds closed in 2025, four of them above €1bn
- France remains the second-largest private debt market in Europe, behind the UK
- Refinancings absorbed 42% of the amounts invested. Hold periods are getting longer and a lot of existing debt is coming due
- Most active sector: industry (excluding manufacturing), with 85 deals, a quarter of the total
- Infrastructure debt: fundraising up 13%, investment flat
Reading: two things are behind this. Institutional investors and family offices have more appetite for the asset class, and private debt is increasingly used to refinance companies while private equity exits stay difficult.
2. Europe: record activity, tighter selection
Across Europe, private credit and hybrid financing hit record volumes in 2025, though lenders have grown more selective.
Direct lending: a record 2025
European direct lending set a record in 2025 at roughly €41.4bn invested. Activity held up in the first half of 2026, with deal count up 4% year on year despite geopolitical uncertainty.
Venture debt: still holding up
European venture debt also held up. After a record 2024, 2025 stayed high at about €19.2bn in deal value (source: PitchBook), close to a third of all startup funding.
Markets converging
Public and private credit keep converging. Private lenders are taking a large share of refinancings when public markets turn volatile.
3. Global trends: convertibles and mezzanine rising
Globally, the backdrop favours hybrid financing: debt is often cheaper than equity once you count dilution.
Convertible bonds: a strong year
Global convertible issuance reached $167bn in 2025, the highest since 2020-2021. The pace has carried into 2026 as companies deal with their maturity wall while trying to hold on to cash.
Mezzanine: steady growth
The global mezzanine market was worth $334.5bn in 2025 and is projected to grow about 6.8% a year (CAGR), reaching close to $565bn by 2034. Europe accounts for roughly 28.6% of it, supported by steady private equity and LBO activity.
Global venture debt: set to double
The global venture debt market stood at $30.2bn in 2025 and is expected to more than double to $78.3bn by 2034, growing 11.4% a year. In the US, venture debt also hit a new high in 2025 at $62.4bn.
4. Rates: stable but high
ECB policy rates (source: ECB, August 2026)
| Rate | Level at 23 July 2026 | Forecast end-2026 |
|---|---|---|
| Deposit rate | 2.25% | 2.50% (after September hike) |
| Refinancing rate | 2.40% | 2.65% |
| Marginal lending rate | 2.65% | 2.90% |
Outlook: economists expect a 25 basis point hike in September 2026, taking the deposit rate to 2.50%, where it’s likely to stay through 2027.
Euro area inflation (source: ECB & KBC, August 2026)
| Period | Headline (HICP) | Core (HICPX) |
|---|---|---|
| May 2026 | 3.2% | 2.6% |
| June 2026 | 2.8% | 2.4% |
| July 2026 | 2.9% | 2.5% |
Projections: average inflation 2026: 2.8–3.0%. Average inflation 2027: 1.8–2.3%.
Bond yields (source: KBC, August 2026)
| Bond | Yield end-July 2026 | Forecast end-2027 |
|---|---|---|
| German 10-year Bund | 3.2% | 3.15% |
| French 10-year OAT | ~4.0% | ~3.8% |
| US 10-year Treasury | 4.75% | 4.55% |
5. What’s supporting hybrid financing, and what to watch
A few structural factors keep supporting hybrid financing, on top of the structural case for hybrid instruments at company level.
- Cost of debt vs equity: even with rates high, debt usually still costs less than the implicit cost of equity, which is dilution. That keeps hybrid instruments attractive for founders and sponsors.
- More selective lenders: lenders favour companies with recurring cash flow and a proven model, especially in tech and services.
- Tailored structures: demand for bespoke solutions stays strong, whether unitranche, mezzanine or PIK notes, so financing can be fitted to each deal, be it an LBO, a bolt-on acquisition or a refinancing.
Risks to watch
| Factor | Potential impact |
|---|---|
| Energy prices (oil around $90/barrel) | Inflationary pressure, wider spreads |
| Geopolitical tension (Middle East) | More volatility, less certainty on ECB projections |
| Further ECB tightening (+25 bps in September) | Higher nominal yields, spreads possibly stable |
Summary for practitioners
| Segment | Average yield | Spread vs sovereign | Trend |
|---|---|---|---|
| Sovereigns, 10-year (DE/FR) | 3.2–4.0% | N/A | Rising sharply |
| Investment grade | ~5.9% | ~80 bps | Stable, tight |
| High yield | ~7.5–8.5% (est.) | ~244 bps (avg) | Stable |
| Leveraged loans (TLB) | ~5.8% | ~330 bps | Historically tight |
In short, the picture going into late 2026 is one of consolidation. Fundraising is up in France (+74%) and across Europe, and global demand for convertibles and mezzanine remains strong. For anyone structuring a financing, the next 12 to 18 months mean debt costs that are stable but high, and lenders who look harder at each file.
Frequently asked
Is hybrid financing still growing in 2026?
Yes. French private debt fundraising rose 74% in 2025 to €14.8bn, European direct lending hit a record of roughly €41.4bn, and global convertible issuance reached $167bn, the highest since 2020-2021. Growth is broad-based across France, Europe and the global market.
Why does debt stay attractive to founders when interest rates are high?
Because even at current levels, debt usually still costs less than the implicit cost of equity, which is dilution. That’s what keeps mezzanine, venture debt and convertible bonds attractive, despite the European Central Bank holding rates at 2.25% and signalling a further hike to 2.50% in September 2026.
What is the outlook for interest rates and inflation in the euro area?
Economists expect a further 25 basis point hike in September 2026, taking the ECB deposit rate to 2.50%, where it’s likely to stay through 2027. Average euro area inflation is projected at 2.8–3.0% for 2026 and 1.8–2.3% for 2027.
Related reading: Why most market analysis on hybrid fundraising gets it wrong.
Sources and references
- France: France Invest / Deloitte, “Activité des fonds de dette privée en France en 2025”, 9th edition, published 18 March 2026.
- Europe, direct lending and leveraged loans: Carlsquare, “European Debt Markets: Quarterly Insights #3 2026”, published 10 August 2026.
- Europe, venture capital and venture debt: PitchBook, “2025 Annual European Venture Report”, published 27 February 2026.
- Eurozone policy rates: European Central Bank, monetary policy decision, 23 July 2026.
- KBC, “Economic Perspectives”, August 2026.
- MarketIntelo, “Mezzanine Finance Market Research 2025”, August 2025.
- AYAKO Partners internal analysis.