2026 Debt Maturities Assessing Refinancing Risk in a Changed Market

Disclaimer: Please be advised that this recorded webinar has been edited from its original format, which may have included a product demo and other engagement features. To set up a live demo, please complete the form above on our website. If you currently are not on our website and are watching this on our YouTube channel, there's a link to the website in the description of this video. Thank you.

Christy: Hello, everyone, and welcome to today's webinar, "2026 Debt Maturities, Assessing Refinancing Risk in a Changed Market." My name is Christy DeMaio Ziegler, and I will be your host from the CSC webinar team.

Joining us today is our moderator, that I have a pleasure to introduce, Tracy Au. Tracy brings over 15 years of restructuring experience across Asia and Europe. She has worked across a range of roles, including liquidator, legal counsel, trustee and agency and SPV management, with a focus on cross-border restructuring and complex capital structures. She is a qualified solicitor in England and Wales and Hong Kong and is based in the CSC London office. And with that, I'd like to turn over the presentation to Tracy.

Tracy: Thank you. Good morning and good afternoon, everyone, and welcome to today's webinar. I'm delighted to be joined by our international panel of experts today, and it's particularly special that this year's discussion is led entirely by an all women panel. A timely way to celebrate International Women's Day in March and recognize the outstanding leadership women continue to bring to the restructuring space.

Our panelists today are Liz Hu, Senior Managing Director at FTI Consulting, Monika Lorenzo-Perez, partner at Squire Patton Boggs, Michelle Dreyer, Managing Director Global Restructuring from CSC. I'm Tracy, and I will be moderating today's discussion.

Joining us from the U.S. is Liz. She specializes in corporate restructuring and lender advisory. From London, we have Monika. She advises creditors, sponsors, and corporates across complex cross-border special situations. And finally, Michelle, my fellow colleague from the U.S., she brings a governance perspective across distressed and restructuring transactions. Thank you all for joining today.

As opening remarks, a significant volume of debt raised during the low interest rate, covenant-light environment of 2020 to 2021 is now approaching maturity. However, the way the financing landscape today looks very different. We are seeing higher interest rates, more selective lenders, tighter liquidity conditions, and increasingly complex capital structures. For some borrowers, refinancing will remain achievable. For others, refinancing risk may begin to resemble restructuring risk. Today's discussion will explore how companies, sponsors, and lenders are preparing for the 2026 maturity cycle and what practical steps can help preserve flexibility before pressure builds.

Let's start with the big picture and turn to our first questions to the panelists. Michelle, perhaps I can start with you. From a governance and market overview perspective, why does 2026 matter so much in practice, and what makes it different from an ordinary refinancing cycle?

Michelle: Thanks, Tracy. I appreciate the question, and welcome, everyone, to today's webinar. When we look at 2026, it's shaping up to be one of the most important maturity years of this cycle because there are several forces that are converging at the same time.

First, we're coming up on the maturity of a very large wave of both loans and high yield bonds that were issued in 2020 and 2021. That was a period defined by cheap capital, covenant-light structures, and abundant liquidity. So companies borrowed a lot. They needed to borrow a lot. And all of the paper is now rolling into maturity in 2026.

What's striking is the volume maturing this year. It's expected to be nearly three times the amount that came due in 2025. Even though this peak is not a true peak, as the absolute peak is projected for 2028, this is the first real pressure point in this cycle and a very front-loaded one.

At the same time, the refinancing landscape today looks different than it did when the debt was raised. We have higher interest rates, more selective lenders, tighter liquidity, and more complex capital structures, all of which make refinancing materially more difficult.

On top of that, many borrowers, especially in private credit and syndicated loan markets, have less financial flexibility than they did a few years ago. Their capital structures were built for a low rate world, and today's rates put real pressure on cash flow and covenant capacity. We're also seeing higher capital needs and a slowing economic backdrop. This limits the ability for companies to organically deliver ahead of their maturities.

So when you put that all together, 2026 becomes a true inflection point. For some companies, refinancing is possible. Maybe more expensive, but possible. For others, especially those with weaker fundamentals, refinancing risk starts to look a lot more like restructuring risk because they'll need to consider liability management tools or more comprehensive solutions rather than just a simple maturity extension. So in short, we're where the post-pandemic credit cycle really gets tested, and early preparation is going to be absolutely critical.

Tracy: Thank you, Michelle. Liz, if we compare 2021 era of debt with today's environment, how material is the shift in cost of capital?

Liz: Yeah. Thanks, Tracy. I would say the shift is pretty material. In fact, one of the biggest differences between 2021 and now is the interest rate environment. Back in 2020 through early 2022, we had near-zero base rates. So even though leveraged loan spreads were high, all-in interest rates and most spec-grade debt was around 4.5% to 5% during this period. Today, spreads are tighter than during the COVID period. In fact, they're close to record lows in 2025. But the base rate is no longer near zero. SOFR is at around 3.5% to 3.75%. So all-in, spec-grade borrowing rates are now in the 7% plus range, which is well above the 4.5% to 5% during the COVID period. And in recent years, spec-grade borrowers have been opting for floating rate loans over fixed rate bonds. So they're more much more exposed to interest rate changes. And for some of these borrowers, refinancing their COVID era debt in the current environment could mean as high as doubling their interest burden.

And not only that, capital markets are more cautious and selective right now. So lenders are looking at cash flows a lot more closely. They're tightening underwriting standards and covenants and requiring more equity contributions from sponsors, meaning refinancing may not be as easy as it once was for certain borrowers, especially highly-leveraged borrowers with lower quality credit.

We should note that many of the stronger issuers have already dealt with their upcoming maturities earlier in the cycle and refinanced their debt. In fact, refinancing activities were very robust in the past two years. U.S. leveraged credit issuance in 2024 was a record high and was also very strong in 2025. And the vast majority of it was for refinancing purposes. And until recent weeks, U.S. leveraged credit markets were still very much wide open for issuers who were rated B or higher.

So much of the refinancing risk and related financial stress will be concentrated on certain industries, like commercial real estate, software, auto, retail, to name a few, and also on weaker, highly-leveraged borrowers. But for the most part, I don't think refinancing is going to be a major systemic risk across the board. We should also note that recent hostilities in Iran and their potential impact on global economy could certainly impact the credit markets going forward, but the impact has been moderate so far.

Tracy: Thank you. Now I turn to Monika. From a legal perspective, how early should companies start to prepare for 2026 maturities?

Monika: Thanks, Tracy. The honest answer is if you have a 2026 maturity and you haven't started yet, you're already behind. And I say that not to be alarmist, but because the data and the market dynamics, as Michelle and Liz have already mentioned, tell a very clear story. High-yield issuers typically refinance 12 to 18 months ahead of maturity, which means for anything maturing in the second half of 2026, that window is either closing or closed. But the legal preparation needs to start even earlier than the refinancing conversation.

What does that look like? You need a thorough review of your existing finance documents. You need to understand precisely what consent thresholds apply, what your amendment and waiver mechanics look like, and critically what majority lender means in your particular structure. LMA form documentation typically requires lenders holding more than two-thirds of participations to approve such steps as waivers or conversions of debt into equity. But those thresholds vary, and in a stress situation, understanding who controls those votes is essential.

Secondly, directors need to be getting proper legal advice on their duties now, not when a default is imminent. The moment a company is likely to become insolvent, as we know, directors' duties shift towards creditor interests. Acting too late not only narrows your options, but potentially creates some personal liability for directors.

And thirdly and finally, I should say, and this is something that I see companies underestimate time and time again, the time to engage with lenders is when you still have leverage and goodwill in the relationship, not when you're in breach or scrambling for a waiver. Borrowers who wait until late in 2026 to address their debt state may find themselves competing for capital in the most crowded markets in a decade.

As Liz has already mentioned, we're looking at companies who, at least in England, financed at 2% to 3% in 2021, now facing rates closer to 6% to 7%, placing significant strain on cash flow and limiting investment capacity. In that environment, lenders are doing their own analysis. You want to be ahead of that conversation, not reacting to it. So my practical answer is 18 months before maturity for the legal and advisory review, 12 months for active refinancing discussions.

Tracy: Thank you. That really helps set the scene. So building on the broader context, let's turn to private credit and the role it's playing in this cycle. Liz, private credit has been one of the defining features of this market. As we look ahead of 2026, do you think private credit funds are primarily taking a defensive stance, or are they also seeing opportunity in the cycle?

Liz: So let's first talk about what it means to act defensively and offensively. So funds acting defensively are much more focused on preserving capital and managing liquidity. They're tightening underwriting standards, investing in higher quality and more senior credits, and avoiding volatile industries.

Offensively, there are opportunities emerging. The upcoming maturities and tighter financing conditions could present refinancing opportunities. Also, there's going to be vulnerable private credit funds that'll need to offload some of their loans to improve liquidity, which could present secondary buying opportunities for larger and better capitalized funds to acquire performing loans at a discount.

That said, the primary issue for private credit right now isn't actually the maturity wall. Maturities generally get refinanced down as they approach because leveraged credit markets continue to accommodate huge amounts of refinancing activity. The more immediate pressure is coming from investor sentiment and liquidity. Private credit is currently experiencing challenges with investor sentiment, which is leading to liquidity challenges and issues, more than it's actually experiencing performance degradation of its loan portfolios.

Investors are concerned about private credit's exposure to AI casualties, like software companies, and that's leading to higher levels of redemption requests. It's kind of like a bank run, but not as severe. In recent weeks, some credit fund redemption requests have exceeded the typical limit of 5% of NAV per quarter. And then funds need to decide now whether to accommodate those requests or enforce their withdrawal limits, which might lead to more panic and more redemption requests. This is happening at some high-profile BDCs as well as some closed-end credit funds.

And on top of that, the opacity of private credit is not helping either. Investors are concerned about whether their marks to market are objective and accurate since there are no observable market trading prices for their loans. There is also concern that private credit funds are more likely to be flexible with troubled credit to avoid triggering a default, like converting to PIK interest, waiving covenant violations, or extending maturities.

It's possible that private credit investors are overreacting to AI-related concerns. We just don't know yet. But regardless, we are seeing high redemption requests even for funds whose loan portfolios might be performing just fine. So while opportunities are building in 2026, I think this current environment for private credit might push some of these funds to act more defensively, at least in the near term.

Tracy: Thank you. The AI-related concern topic is very interesting indeed. Now I turn to Monika. How are private credit lenders structuring protections ahead of 2026 maturities?

Monika: So this is a fascinating area because we're seeing two competing forces in the private credit market at the moment, and the tension between them is shaping how deals are getting documented. On one hand, private credit financings, which traditionally include maintenance covenants, are now shifting towards covenant-light structures, particularly in unitranche and senior direct lending. So private credit funds are increasing their presence in the large-cap leveraged finance market.

So in competitive situations, particularly in the large-cap sponsor-backed space, private credit lenders are being forced to concede ground on documentation. On the other hand, lenders are increasingly demanding stronger safeguards in contrast to the pre-pandemic era, ranging from maintenance covenants and stricter leverage ratios to enhanced reporting requirements, particularly for weaker credits. So what you're seeing is a bifurcation. Top-tier borrowers are still getting relatively borrower-friendly terms. But for anything with credit complexity, lenders are pushing hard for protections.

In terms of specific structural tools private credit lenders are deploying ahead of 2026, a few stand out. First, maintenance covenants remain a critical tool. If a company's debt-to-earnings ratio gets too high, a covenant default gives lenders an early warning and allows them to step in legally and work with management, renegotiate loan terms, or require corrective action before payment problems arise. That early engagement is something syndicated lenders in covenant-light structures simply don't have.

There is also an increased focus on what lenders call trap doors in documentation, the loopholes that have allowed the U.S. style liability management exercises to flourish. Private credit lenders are focusing on limiting those loopholes in covenants that might allow sponsors or borrowers to undertake liability management exercises, such as uptiering or drop-down and asset stripping transactions. We saw those techniques arrive in Europe through 2025, in the likes of Victoria, Hunkemöller, and Selecta. And private credit lenders are specifically drafting against them.

Again, the overall message for borrowers, private credit lenders are more engaged counterparties than syndicated markets, but they're also more informed and more likely to intervene early. That relationship, properly managed, can actually be an advantage in a restructuring situation.

Tracy: Thank you. That is actually very thorough like discussions on the topic. That highlights the growing role of private credit. But what happens when refinancing isn't enough? Let's look at the range of restructuring tools that companies and creditors are using to address that. I will turn to Monika again. What tools are available to address upcoming maturities outside of bankruptcy?

Monika: So I think this is one area where England and Wales lead the world in terms of the sophistication and breadth of the toolkit available. And it's sort of worth laying out that clearly from the start.

We've got our purely contractual options, which are always the preferred starting point, an amend and extend often in exchange for pricing improvements, tighter covenants, or additional security. This requires majority lender consent, sometimes unanimity, depending on the provision. And it works well when lender relationships are intact and the credit story is broadly sound.

Related to this, we have our full refinancing, which we've discussed in the syndicated or private credit markets. And despite the challenging macro environment, as Liz has already mentioned, many companies have refinanced debt, extended maturities, and deleveraged, leaving corporate balance sheets generally healthier.

Moving up the intervention scale, liability management exercises have become an increasingly significant feature of the landscape. A growing toolkit of non-pro rata, sponsor-led LMEs, mirroring what we have seen in the U.S., is taking hold in the UK against a backdrop of loose covenants, rising rates, and looming maturities. These involve using the contractual flexibility in existing documents to restructure obligations without any court process. They are faster and more confidential than formal procedures, but they carry litigation risk as we have seen, particularly from creditors who feel disadvantaged. And we are now seeing European courts having to grapple with challenges that these transactions bring.

On the formal corp supervised side, but still outside of full insolvency, England has some great tools available. We have the tried-and-tested scheme of arrangement, which is available to solvent and insolvent companies, that can be used for everything from a simple amend and extend to a full debt for equity restructuring. And we have also, which was introduced in 2020, the restructuring plan under Part 26A, which includes a cross-class cram down mechanism, something you can't say very quickly, that can bind descending class creditors, which is a genuinely powerful tool for dealing with holdout lenders.

An uncontested restructuring plan can be finalized and approved by the court in as little as eight weeks. Obviously, there's a long lead time in getting it to court. However, as you will probably have seen if you follow any of the press reports in England, restructuring plans are becoming increasingly costly and uncertain with growing challenge risk.

The overarching theme across all these tools is that time matters. And I think we will probably all be repeating this over and over again throughout the course of this webinar. The earlier a company engages, the more options it has, the more credit and goodwill it can preserve, and critically, from a director's perspective, the better protected individuals are. Yeah, the worst outcome is being forced into some kind of process that could have been avoided with six months earlier action.

Tracy: Thank you, Monika. Totally agree on early preparations. Restructuring plans like recent developments definitely interesting, and also see like new to LME now is a hot topic in Europe as well. We can always make reference to the U.S.

Now we come to a topic that I think for Michelle and myself, that is our day in, day out like service provided to our client, so it is going to be very interesting. Michelle, turning to structuring, how are private credit funds using SPVs to isolate risk, manage exposure, or create flexibility as we move closer to this maturity cycle?

Michelle: Yes, this is definitely a topic near and dear to my heart, and it's an area where we're seeing considerable sophistication in the private credit market. When we talk about SPVs or special purpose vehicles, what we're really talking about is a structural tool that private credit funds use to create clear separations between different pools of assets. That separation becomes incredibly important when you're managing through a cycle with increased refinancing pressure.

One of the biggest reasons funds use SPVs is risk isolation. By placing specific loans or exposures into a dedicated vehicle, they can ring fence that risk away from the rest of their platform. That means if a particular borrower starts to come under stress, the impact is contained within that SPV rather than impacting an entire portfolio. It's a way of structuring the exposure so that issues remain compartmentalized.

A second key use is around exposure and capital management. SPVs give funds the ability to tailor how much capital they commit to a particular position, if they want to bring in co-investors or reshuffle their exposure across investors without disturbing the main fund structure. In practice, it allows private credit funds to take on more bespoke, complex, or higher yielding transactions while still staying within their overall risk limits.

There are also some real operational and regulatory benefits. An SPV can streamline decision-making because lenders are consolidated into a single entity. That becomes extremely useful in refinancing, amendments, or restructuring negotiations, where speed and alignment matter. We've talked about coming in early and refinancing, but sometimes that doesn't happen. And so these SPVs allow for speed to help with issues as they arise.

SPVs can also help navigate cross-border rules, tax considerations, or regulatory requirements that might not work as clearly within the primary fund. When you step back and look at the bigger picture, SPVs give private credit funds a great deal of flexibility, not only to protect the portfolio, but also to position themselves to be opportunistic. As we move closer into the 2026 maturity cycle, funds are already using these structures to manage challenged credits more proactively and to deploy capital into situations where companies may need rescue financing or structured solutions.

Tracy: Thank you, Michelle and Monika. That's a very helpful and practical overview of the tools. So when does this actually become a restructuring situation? Let me turn to Liz now. When does refinancing stop being a capital markets issue and start becoming a restructuring issue?

Liz: Well, refinancing risk becomes restructuring risk when leveraged credit markets stop accommodating highly-stressed borrowers. At that point, it's not about the cost of capital anymore. It's about the availability of capital.

As the primary issuance market becomes more selective, particularly with respect to highly-stressed borrowers, there are less refinancing options and capital market solutions. And we're likely moving in the direction driven by all the uncertainty over geopolitical events and the concerns about the overall health of the global economy. And in many cases, recent refinancing activities haven't really addressed the borrower's fundamental challenges.

S&P reported that distressed debt exchanges, or DDE for short, accounted for 55% of all rated default events in 2025, which was an all-time high, and exceeded 50% for the second straight year. There were also over 100 LMEs in 2024 and 2025. So these transactions, DDEs and LMEs are generally designed to avoid a formal default by buying time and/or creating more borrowing capacity through financial engineering. But these are not enduring solutions as we all know.

According to S&P, about 30% to 40% of default events in 2024 and 2025 were redfaults, situations where companies that previously executed a distressed exchange subsequently defaulted again or entered a formal restructuring. This means the refinancing solutions didn't really address the underlying problems. They just deferred the problems.

And we have not had a true recession or a bona fide credit default cycle since 2008/2009. The COVID period dislocation was sharp, but it was too brief to be either. So when a more traditional downturn eventually occurs, the impact on the leveraged credit sector, corporate sector will be acute, and the Band-Aid fixes will not be available. And at that point, many borrowers will need to confront their fundamental issues, whether balance sheet or operational or both, and pursue comprehensive restructuring solutions rather than deferring the inevitable.

Tracy: That's very true. Here comes to the last question of this webinar, and we turn to Michelle to close on a practical note. Which sectors or borrower profiles do you think are most likely to need more creative restructuring solutions because a simple refinancing just will not be enough?

Michelle: Thanks, Tracy. Yes, this is a very important question because it gets to the heart of where refinancing simply won't be enough as we move through the 2026 and future maturity cycles. As Liz noted, there is money within the capital markets for those borrowers who are credit worthy, but those who are lower rated are having some difficulties.

When we look across the market, there are several specific sectors that are likely to require more creative or bespoke restructuring solutions rather than just a straight refinancing. First, commercial real estate, this is high on the list. Many borrowers in this sector are facing declining valuations, higher vacancy rates, and capital structures that were built for a completely different rate environment. For them, the math just doesn't work with today's interest rate costs. So traditional refinancing isn't going to bridge the gap.

We're also watching health care, where margins have been compressed by labor costs, regulatory pressures, and slower reimbursement timelines. Liquidity is tighter, leverage is elevated, and lenders are increasingly cautious, all of which point toward more structured or multi-step solutions.

Retail and consumer goods is another area under strain. It's had its own share of issues here in the U.S. Certainly several of these types of companies have already filed for Chapter 11 bankruptcy protection. And the sector is continuing to deal with weakened demand, inventory imbalances, and persistent cost inflation. Many of these businesses simply don't have the revenue trajectory to support refinancing terms that lenders are requiring today.

Manufacturing and logistics is another area where borrowers are being hit with both higher working capital needs and cyclical softness. Telecom and technology companies that grew quickly during the pandemic are now contending with slower growth, higher capital expenditure requirements, which creates a mismatch with refinancing economics.

So those are the sectors. But equally important are the borrower profiles that do tend to struggle in a high rate environment. One key group is what we called no growth or low growth assets. These companies simply don't have enough cash flow momentum to absorb refinancing at today's interest levels.

Another vulnerable segment are weakly-rated corporate issuers, particularly those that benefited from covenant-light financing during the last cycle. With limited lender appetite, many of them have to explore nontraditional capital solutions.

And lastly, we're watching either self-employed or owner-led businesses, which often lack scale, reporting, or governance frameworks that lenders are now expecting. And also, mid-market companies that haven't secured long-term capital are exposed. These businesses will likely need hybrid approaches, whether that's structured equity, preferred instruments, asset-level financing, or collaborative lender negotiations.

The sectors and borrower profiles that are capital intensive, low growth, or structurally challenged will be the ones that need the most creativity. For them, refinancing is unlikely to solve their problem. It's going to take earlier planning, more flexible capital solutions, and a willingness to rethink the capital structure altogether.

Tracy: Thank you, Michelle. We also see similar sectors a factor in Europe as well, and one UK specific sector I would say probably is education. Again, thank you all for the insights.

One key takeaway was that 2026 maturities are generally manageable because of the robust refinancing activities leading up to now. Stronger borrowers have already refinanced and dealt with upcoming maturities. Refinancing risk in 2026 will be largely concentrated on highly-leveraged borrowers and lower-quality credits. But hopefully, it looks like there won't be a systemic issue in 2026.

One thing that clearly emerges from today's discussion is that preparation is critical. Organizations that begin assessing maturity exposure early, financially, legally, and from a governance perspective are far better positioned when engaging lenders. 2026 may represent a significant refinancing cycle. But with early planning and effective stakeholder coordinations, companies can preserve flexibility and avoid decisions being made under pressure.

Thank you to our panelists and thank you to everyone who joined us today. If you have any questions, please do reach out to us and we will be happy to answer your questions.