For charts go to discussion.fool.com - Debt wall extend my loan

wsj.com - A billion debt wall is looming over private equity backed companies


A $300 Billion ‘Debt Wall’ Is Looming Over Private-Equity Backed Companies
Software firms account for about a third of the risky corporate loans due in 2028 and 2029

By Matt Wirz and Mark Maurer, The Wall Street Journal, Updated Oct. 27, 2026

Private-equity firms are racing to negotiate loan extensions on much of a $300 billion wall of debt coming due starting in 2028.
Software companies account for about one-third of the risky corporate loans scheduled to mature in 2028 and 2029.
About one-quarter of the loans due in 2028 and 2029 have junk ratings of CCC-plus or below, according to PitchBook data.

Private-equity firms are scrambling to avoid big losses from a potential wave of defaults by the companies they own.

Fund managers are racing to negotiate loan extensions on much of a $300 billion wall of debt that is coming due starting in 2028. It is a pressing need that is intensifying because rising interest rates have made refinancing more expensive this year. And much of it is for software companies at risk of being eclipsed by artificial-intelligence companies...

Buyout fund managers that fail to get loan extensions risk having the companies they own taken over by creditors and their investments wiped out. ...

Most companies refinance large obligations 18 to 24 months in advance as a precaution, whittling down the amount of debt coming due in that time frame. Companies owned by private equity have found that harder to do, creating an unusually high “maturity wall” in coming years...

Private-credit firms that made many of the loans are also under pressure from default risk...

Returns for private-equity funds have dropped below 10% in recent years from around 15% when interest rates were nearly zero... [end quote]

Private equity firms borrowed hugely in 2020-2022 when the Fed was pouring money into the system due to Covid and real yields were close to zero. The private equity firms planned to flip their companies for a profit but, oops, interest rates went up and now they’re stuck with companies they can’t sell and actually have to run. (Poorly in many cases.)

They would like to refinance but, sorry, many are rated junk. Take a look at these rates - 18% for CCC and below.

ICE BofA CCC & Lower US High Yield Index Effective Yield

This will hit lenders hard. Private credit companies are already restricting withdrawals from investors. Insurance companies and pension funds will have problems.

For the private equity firms, especially the ones loaded with SaaS companies, they are caught between Scylla and Charybdis. Refinance at 18%? Or fold?

$300 billion is about 1% of GDP but it is heavily concentrated in both its borrowers (software) and its lenders (pensions and insurance).

Pensions and insurance companies have strict asset-liability matching requirements. That is, they are legally required to pay out cash at specific times. If they lose money from their private credit loans they will be forced to sell other assets (such as stocks) to raise the cash. This could cause a drop in the overall stock market.

Most of the lenders are “shadow banks” - private credit isn’t regulated by the Federal Reserve the way regular banks are. But regular banks are entangled because they give credit lines to the shadow banks. If there are big losses, the banks will be forced to tighten lending in other areas, making it harder for healthy, non-PE-backed small and medium-sized enterprises (SMEs) to secure working capital. That could slow the real economy and potentially cause a recession.

High-performing SaaS companies may be able to extend their loans at a higher interest rate. Instead of traditional refinancings—where a company pays off old debt with a brand-new loan from a new bank—private equity (PE) sponsors and direct lenders are turning to Amend-and-Extend" (A&E) agreements where the borrower has to inject additional cash to pay down part of the loan.

Legacy / AI-Vulnerable Software companies will be forced to pay junk bond yields and inject a large amount of new capital or fold.

Over-leveraged “Zombies” will be taken over by the lenders. The private equity investors will lose everything.

It won’t be pretty.
Wendy