One of Europe’s biggest investors in leveraged finance has predicted a surge in demand for alternative forms of debt, estimating the emergence of a €50bn gap in mainstream leveraged finance issuance in Europe in the coming years.

Intermediate Capital Group, which provides debt to mid-market buyouts, has said alternative finance sources such as mezzanine - which ranks low down in a company's capital structure - high-yield bonds and debt funds will represent a large portion of funding, following a substantial reduction in liquidity in the traditional leveraged finance markets.