By Neil Callanan | Updated on Jun 11, 2026 at 05:47 PM
Higher-for-longer interest rates means over-leveraged companies are running out of ways to repay their borrowings ahead of a looming maturity wall, according to Brook Hinchman, a managing director at Oaktree Capital Management LP.
More than $200 billion of high yield and leveraged loan debt is trading below 90 cents on the dollar and above 15% yield-to-maturity, much of it from buyout deals in 2021 and 2022, Hinchman said on an Oaktree podcast . That’s “a very large amount,” he added.
After interest rates rose, many struggling companies took on expensive debt, known as ‘payment-in-kind,’ to delay having to pay cash interest, or used restructurings called liability-management exercises to amend their borrowings.
“There’s been a lot of kicking of the can as a result of LMEs and PIK,” as most of the loans are for six years, said Hinchman. “You’ve really kind of stretched as much as possible to delay the inevitable. But once you get to these hard maturities, we see that there is going to be a lot of opportunities.”
Hinchman joins a number of investors cautioning about the maturity wave facing borrowers in the coming years. That includes Pacific Investment Management Co.’s Chief Investment Officer, Daniel Ivascyn, who warned that the first sustained default cycle in credit in many years has already begun.
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Much of the concern is around software lending after the emergence of artificial intelligence. Citigroup Inc.’s Michael Anderson and Steph Choe wrote earlier this year that a third of technology company issuers with debt maturing in 2028 haven’t been able to demonstrate that they have access to capital markets for many years. Those companies will likely start trying to refinance the debt from the second half of this year, they wrote.
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Similar problems could emerge in private credit, an industry which Hinchman said did over-leveraged deals during the pandemic, much of it in the enterprise software sector.
“We don’t think that direct lending as a asset class is broken, but what we see is that the current subset of deals are overexposed to one challenged industry and overexposed to one bad vintage,” Hinchman said.
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