Still waters but trouble brewing

Aug 26, 2026

We look at selective opportunities in European stressed and distressed credit.

Key takeaways:

  • Despite European high yield (HY) spreads trading close to multi-year tights, corporate distress – driven primarily by earnings weakness – has risen sharply to a four-year high, with 1,411 businesses across EMEA classified as distressed, up 18.4% over three years.
  • Far from idiosyncratic, sector distress risks becoming systemic: geopolitical shock, trade disruption, subdued growth, supply chain pressures, inflation, higher borrowing costs, or fragile confidence – catalysts for distress are finding their way into company fundamentals.
  • An overlay of country factors is also feeding into a deteriorating outlook, with distress evident across some of Europe’s largest economies.
  • For companies under pressure, the window for proactive restructuring might be narrowing, but for credit investors there could be opportunities to take, turning rising corporate distress today into the potential special situations of tomorrow.

Read our full piece here