Facing the refinancing cliff: Why a global maturity wall may drive a surge in corporate restructuring

Oxford law grad Evina Yadav discusses how an approaching debt ‘maturity wall’ could impact the UK’s economy

The global corporate debt landscape is entering a difficult phase where and a large volume of corporate debt, issued during the low-rate period of 2020–2021, is approaching maturity. This “maturity wall” can have significant implications for the UK economy. With around one-third of UK corporate debt financed through market-based mechanisms, and key sectors like private equity-backed firms and commercial real estate facing increases in borrowing costs, companies must determine how to refinance without triggering distress. This article explores what the maturity wall is, how it could impact the UK economy, and what can be done to mitigate its effects.

What is the maturity wall and why does it matter?

The “maturity wall” is a term used to describe a high volume of corporate debt that is scheduled to mature within the next couple of years — a relatively short timeframe. Goldman Sachs has estimated that globally 29% of outstanding high-yield bonds and 24% of leveraged loans will mature by the end of 2025. This maturity wall is a concern if this volume of debt reaches maturity when interest rates are high, borrowing conditions are tight, or credit markets are cautious. This is reflective of the current global economy, making refinancing more difficult and expensive. This results from a surge in demand for refinancing in a less favourable credit environment than when the debt was originally issued.

In Europe, Newmark estimates that commercial real estate debt alone will amount to around $2 trillion maturing between 2024 and 2026. This could cause an influx in restructurings and defaults creating a wave of financial distress for companies, especially in situations where the debt was issued during the low-rate period of 2020 to 2021. In this low-rate period, the interests rates across major economies, particularly the US and UK, were historically low, credit was cheap and there was significant liquidity. Consequently, companies across all sectors took advantage and refinanced or raised debt at these lower rates.

However, there has been significant change in macroeconomic policy since, with central banks raising interests rates by over 500 points in key economies. As these maturities cluster and lenders grow more selective, a refinancing gap could emerge. This is when the volume of maturing debt exceeds the amount of capital available by a significant amount, leading to even greater financial stress across markets. If companies are unable to refinance maturing debt on acceptable terms, they may be forced to undertake distressed exchanges, sell assets at discounted rates, or initiate formal restructuring proceedings which could lead to insolvency.

How will the maturity wall impact the UK?

The maturity wall can have a significant impact on the UK economy. Bank Underground, based on LSEG data, reports that approximately 15% of UK corporate bonds will mature within the next two years. Although these levels are not abnormally high, the refinancing risk is elevated due to the current economic conditions.

For UK companies relying on market-based finance (MBF), which makes up approximately onethird of total corporate debt, the Bank of England’s Financial Stability Report (FSR) notes that 10% or more of MBF debt will require refinancing over the coming year, and nearly half of the total MBF debt is set to mature in the next five years. When companies refinance debt originally issued at 2–3% in 2021, they now must adapt to rates closer to 6–7%. This places significant strain on cashflow and limits investment capacity. CEPR and The Times estimate that in Q3 2023, higher rates led to an 8% reduction in capital expenditure and 2% fewer jobs. While policy rates have since eased to around 4.25% by mid2025, borrowing remains far costlier than prepandemic levels, adding to the risk the maturity wall poses.

Additionally, the maturity wall poses significant risks for certain UK sectors. 15% of UK corporate debt is represented by private equity-backed firms, leaving them especially exposed to higher interest rates and tightened lending conditions. Commercial real estate is also an industry that is very exposed, as European and UK CRE valuations have fallen due to the increased cost of capital. The ESMA’s review of real estate exposure explains that CRE is especially vulnerable to the refinancing cost due a fall in rental yields and the tightening of liquidity. The Financial Stability Board further warned that non-bank real estate investors, such as property funds, remain sensitive to interest rate changes which could lead to the rapid sale of undervalued assets.

Although the UK has a rather resilient financial system, firms who rely heavily on MBF are more vulnerable to financial shocks. This could lead to a rise of restructuring and insolvency proceedings in areas like CRE where refinancing gaps and a fall in valuation align.

How can the impacts of the maturity wall be mitigated?

Though the maturity wall has the potential to significantly impact the UK economy, especially in private equity and CRE, its impacts can be mitigated through commercial strategy and policy frameworks. Companies can seek early refinancing or amend financial arrangements to alleviate some of their debt maturity ahead of tightening liquidity. LGT Wealth Management discussed how corporate pre-financing, the proactive issuing of debt to replace or extend refinancing, has been widely adopted. Additionally, Berkley Research Group explains that companies are utilising tools like debt for equity swaps to change the terms of existing agreements before they face significant financial trouble. The purpose of this is to avoid entering formal insolvency processes.

Companies can also utilise Company Voluntary Arrangements (CVAs) and Part 26A of the Restructuring Plan. These tools can be used as a pre-emptive measure to restructure corporate debt and bind creditors. However, these measures are often underused by smaller firms. The Bank of England has also warned about vulnerabilities in MBF and non-bank financing. If this refinancing pressure impacts the broader financial system, there may be a need for regulators to provide liquidity support and options for non-bank financing which may be less resilient. Hence, there remain options to mitigate the impacts of the maturity wall and reduce the risk on the UK economy.

In conclusion, the maturity wall presents a risk to the UK economy, particularly for firms with large refinancing needs and limited access to affordable capital. Sectors like private equity and commercial real estate are especially exposed due to their reliance on market-based finance and higher leverage. However, these risks can be mitigated through proactive refinancing and restructuring strategies. The true impacts of the maturity wall remain to be seen.

Evina Yadav is a 2024 law graduate from the University of Oxford with a strong interest in commercial law, particularly in restructuring & insolvency and private equity: venture capital. She is curious about how legal frameworks operating at high-risk points in a company’s lifecycle can shape outcomes and contribute to long-term success.