Differing perspectives on the ‘maturity wall’

A ratings agency and an investment and advisory firm appear to have two contrasting views of one of private credit’s hot topics.

A new paper from KBRA Research argues that the much-discussed “maturity wall” is a myth.

In examining the purported wall, KBRA Research – the research arm affiliated with Kroll Bond Rating Agency – uses Kroll’s recent credit estimates of more than 1,800 mid-market private credit borrowers. Only 10 to 15 percent of the total loans in that market are scheduled to mature over the next two years.

As an example of the conventional assessments that KBRA brings into question: last year a whitepaper from StepStone Group said that more than $2 trillion of debt is maturing in the US alone. This will prove especially challenging, StepStone suggested, for real estate entities pursuing a “buy, fix, and sell” strategy.

Affiliate publication PERE, writing about this whitepaper last September, quoted the head of StepStone Real Estate, Jeff Giller, who said the firm’s deal pipeline was crowded with borrowers under stress as a consequence of the looming wall seeking liquidity.

In that – and in much else that has been written of late, in this publication and elsewhere – the existence of the maturity wall is typically taken as a foregone conclusion.

KBRA, too, acknowledges some truth behind the metaphor. It says there will be heightened refinancing risks starting in 2026. But the report contends that talk of a maturity wall is a misdiagnosis of the problem facing the private credit market. The real risk lies in a combination of higher interest rates and slower growth.

Contacted by PDI, Giller of StepStone re-affirmed his view that the maturity wall is very real.

“For years [subsequent to the global financial crisis] debt costs were cheap and borrowers could rely on short-term, low-cost financing. I don’t argue with the percentages posited by KBRA. Perhaps only 15 percent of that volume of borrowing is scheduled to mature over the next two years. But that is 15 percent of a historically high level of borrowing, so the 15 percent may very well be consistent with the absolute number we employed in our whitepaper.”

KBRA, reached for reaction to Giller’s points, noted that there is a difference in focus between its own research paper focused on private mid-market corporate loan maturities, and StepStone’s work on liquidity-constrained real estate.

In terms of dollar amounts, KBRA said the $2 trillion figure cited by StepStone “likely includes the broader amount of corporate high yield, BSL and investment grade corporate bond market debt.” Those markets combined add up to more than $13 trillion of outstanding debt. As a proportion, then, not necessarily that large. Whether it qualifies as a wall is really in the eye of the beholder.

Write to the author at Christopher.f@pei.group