Several industries face debt wall as lenders take action: Teneo analysis

The global credit market is entering a highly volatile phase as more than $1.4 trillion of high-yield debt is set to mature between 2026 and 2027. This impending maturity wall will trigger a perfect storm over the next 18 months, forcing a major shift from temporary out-of-court fixes to comprehensive financial restructurings, according to recent insight from management consultancy Teneo.

The report highlights that the long-standing era of ‘extend and pretend’, where lenders deferred financial stress by extending maturities or altering interest payment structures, is reaching its structural limit. With higher borrowing costs, tighter liquidity, and rising macroeconomic uncertainty, companies with weak underlying fundamentals will no longer be able to delay genuine operational overhauls.

Because of this growing pressure, lenders have been stepping in much earlier, taking over weak companies, and forcing major corporate overhauls. The areas hitting the hardest walls include commercial real estate – where office values are crashing – and the software industry, where the rapid rise of AI is disrupting traditional business models and cutting into tech sales. Other especially vulnerable areas include retail, hotels, and automotive suppliers.

Public debt markets have seen a massive expansion since the global financial crisis in 2008, with the total volume of outstanding high-yield corporate debt growing fourfold. Lenders and borrowers must now confront a massive maturity schedule, as over $5 trillion in total high-yield debt comes due between 2026 and 2029.

This maturity wall is colliding with a more volatile macro backdrop: Since the worsening of the ongoing conflicts in the Middle East, debt market volatility and yields for sub-investment-grade credit have increased substantially, as have prices of oil and gas, particularly in Europe.

While these pressures are highly visible in public credit markets, Teneo notes that public spreads ultimately dictate the pricing, underwriting, and exit pathways for the rapidly growing private credit market as well.

Hidden risks in private credit

The private credit market reached $3.5 trillion in 2025, but the sector is now facing its first major credit cycle stress test. Although reported default rates in private credit currently appear low, the report cautions that these figures do not reflect the true level of underlying stress.

Widespread maturity extensions and the fact that roughly 10% of private credit loans now utilize payment-in-kind features have effectively masked borrower under-performance. In fact, approximately 14% of private credit borrowers do not generate enough earnings to cover their current interest expenses. This financial strain is expected to become fully apparent as refinancing pressures intensify.

Private credit funds also face structural risks stemming from a mismatch between their illiquid loan assets and the flexible redemption options offered to investors.

The recent surge in redemptions highlights the risk of a liquidity crunch, especially as the maturity wall approaches. While this is a structural issue rather than a sign of immediate credit deterioration, sustained redemption pressure could pose significant risks for funds reliant on retail inflows, as these vehicles are inherently more sensitive to shifts in market sentiment and liquidity conditions.

Shifting industry dynamics

In response to these mounting pressures, private lenders are changing their approach by implementing tighter underwriting standards, executing earlier interventions, and expanding their in-house corporate workout capabilities. The market is also seeing a clear separation between healthy and stressed borrowers.

While strong companies continue to use light-touch refinancing strategies proactively to optimize corporate finance, stressed companies are entering negotiations much later, facing significantly higher costs, and increasingly undergoing full-scale debt-for-equity swaps or changes of control.

Sectors suffering severe strain

Teneo identifies several industries that are highly exposed to this wave of restructuring, specifically those burdened by heavy leverage and shifting structural demands. Commercial real estate remains under global pressure, particularly in Hong Kong where Grade A office prices in core districts have dropped by approximately 60% from their 2018 peak, turning weaker developers into forced sellers.

Following a period of partial normalization in 2024, private equity activity slowed materially in the first half of 2025 across both investments and exits, spanning all deal size categories. Deal-making activity has effectively paused as sponsors remain reluctant to exit investments amid persistently high interest rates, valuation pressure and continued macroeconomic uncertainty.

The analysis also points out that certain segments of the software and business services sectors are also vulnerable due to the rise of AI. As these new tools automate corporate tasks, the traditional seat-based software purchasing model is losing alignment with actual value, creating near-term revenue risks and forcing an unstable transition toward hybrid pricing models.