For years, a multi-billion debt wall has been looming over private equity-sponsored companies.
From the first interest-rate warnings in 2022 to today’s $300 billion maturity wall, regulators, researchers, analysts and journalists have repeatedly flagged the risks. Why have those warnings not been enough to stop the problem from growing?
The warning signs have been accumulating for years. Private equity firms have acquired companies with heavy borrowing. Lenders have extended credit to increasingly leveraged businesses, while some borrowers have relied on refinancing, debt extensions and payment-in-kind interest to manage their obligations. Now hundreds of billions of dollars in loans to private equity-backed companies are coming due, sharpening those longstanding concerns.
A new Wall Street Journal article, “A $300 Billion Debt Wall Is Looming Over Private-Equity Backed Companies,” estimates that roughly $300 billion in risky loans to private equity-backed businesses matures in 2028 and 2029. About $140 billion comes due in 2028 and another $160 billion in 2029. Roughly one-third of the debt is associated with software companies, many of which were acquired during the buyout boom when financing was cheaper.
The problem is not simply that the debt must be repaid. Companies that borrowed when interest rates were low may find refinancing much more expensive. Those whose earnings have weakened may struggle to qualify for new loans. And businesses that have deferred cash interest by adding it to principal face harder refinancing choices.
But the underlying problem did not begin with the latest debt-wall headlines. Warnings about buyout leverage date to 2019, and by 2022 research cautioned that higher interest rates could pressure leveraged borrowers. Subsequent reports documented rising defaults, growing use of payment-in-kind interest, weakening credit protections and the difficulties of refinancing loans. I have written extensively in Forbes about private equity, private credit and the increasingly complex links between those markets, banks and insurers.
The chronology matters. If the risks were visible years ago, the real question is why the politicians, regulators, and the financial system let leverage and interconnected exposures to grow while the warnings accumulated.
A Chronology Of Warnings: 2019–2026
2019: Private equity’s impact on Americans and the financial system
I have warned about private equity risks since 2019 and have published many articles on the subject. Several are below:
My concern goes beyond the debt at individual portfolio companies to the institutions financing it and the investors whose savings are exposed to the resulting risks.
2020: Academic researchers and market analysts challenge the buyout leverage model
In 2020, even as emergency liquidity during the COVID-19 pandemic gave distressed borrowers temporary relief, researchers and market commentators began warning explicitly about the systemic risks of heavily indebted private equity portfolio companies.
Dan Rasmussen and other Verdad Advisers researchers published critical analyses of leverage dynamics, challenging the industry assumption that private equity portfolio companies could safely carry twice the debt of comparable public companies without significant default risk.
Meanwhile, researchers including Eileen Appelbaum of the Center for Economic and Policy Research (CEPR) and Rosemary Batt, of Cornell University, documented how debt burdens in private equity buyouts—particularly across healthcare, retail, and hospitality—were eroding operational cash flows, leaving companies structurally vulnerable to market shocks long before interest rates began to rise.
2021: Research and legislative proposals focus on buyout leverage
By 2021, studies and investigative reporting increasingly focused on the long-term fragility created by highly leveraged buyouts.
A widely cited study by economist Sharjil Haque ‘Does Private Equity Over-Lever Portfolio Companies?‘ (circulated in 2021 and published by the Federal Reserve Board in 2023) found that private equity ownership leads to substantially higher leverage. It argued, however, that this leverage is largely optimal, because buyouts reduce portfolio companies’ asset volatility and expected distress costs, and sponsors often inject equity when companies struggle. The paper is a useful counterpoint to critics, though it also documents the much higher debt loads that follow a buyout.
Professor Arthur Wilmarth of George Washington University Law School strongly advocated for financial reform. “Our financial system must be reformed so that it no longer promotes unsustainable booms, fueled by reckless growth in private debts, followed by destructive busts that require massive bailouts and corresponding increases in government debts.”
Meanwhile, journalists and policy analysts discussing legislative initiatives such as the Stop Wall Street Looting Act argued that excessive debt loading and dividend recapitalizations shifted risk to creditors, employees and portfolio companies while insulating sponsors.
2022: Rising interest rates expose the vulnerability
The Federal Reserve began raising interest rates aggressively in 2022 to combat inflation, creating an immediate challenge for companies whose acquisitions were financed with floating-rate loans.
In October 2022, credit-rating firm KBRA published Private Credit: 12% Is Not Affordable for Many Borrowers. Its analysis of more than 2,400 credit assessments found that a typical unhedged borrower in its portfolio was already facing an estimated 30% increase in interest expense compared with the beginning of the year. KBRA warned that higher rates alone could significantly affect middle-market borrowers, even before accounting for a recession or higher operating costs.
In September 2022, Crisil had also warned about emerging risks in private credit, including elevated portfolio concentration, relaxed underwriting standards, shrinking liquidity and deteriorating borrower conditions.
By November, PitchBook’s leveraged-finance analysis was highlighting the pressure on private equity-backed companies carrying floating-rate debt. Sponsored companies accounted for more than 60% of the U.S. leveraged-loan market, and investors were demanding greater compensation for holding their loans.
The message was clear: the financing environment behind years of leveraged acquisitions was changing, and heavily indebted companies could not count on cheap refinancing.
2023: Higher borrowing costs begin to translate into credit stress
The Federal Reserve’s May 2023 Financial Stability Report noted that leveraged-loan credit quality had begun to deteriorate. Downgrades exceeded upgrades in the second half of 2022, while default rates increased for four consecutive quarters. The Fed also highlighted the historically high proportion of newly issued corporate loans with debt exceeding five times EBITDA.
Meanwhile, the private-credit market expanded as traditional bank and syndicated-loan financing became more difficult to obtain. That expansion helped finance transactions that might otherwise have stalled, but it also shifted more corporate lending into a market with less public disclosure.
The growing use of payment-in-kind interest was another warning sign. PIK arrangements allow borrowers to add interest to their debt rather than pay it in cash. Some loans are structured with PIK from the outset, but growing use to accommodate struggling borrowers can signal cash-flow pressure.
The concern was not only that defaults might rise but that lenders could delay recognizing distress by amending terms or extending maturities.
2024: The Federal Reserve identifies structural risks in private credit
In February 2024, the Federal Reserve published Private Credit: Characteristics and Risks. The note warned that private credit could increase overall corporate leverage and make the corporate sector more vulnerable to financial shocks. It specifically identified the danger that rising interest payments on floating-rate debt could strain borrowers and increase defaults during an economic downturn.
S&P also made an important distinction between payment defaults and broader credit distress. Troubled companies may avoid a formal default through distressed exchanges, interest deferrals, maturity extensions or sponsor equity injections. These arrangements can provide valuable time for a company to recover, but they can also obscure the extent of financial deterioration.
By this stage, warnings about higher interest expenses had evolved into concerns about how the market was managing the resulting distress. Also in 2024, Professor Arthur Wilmarth argued for a new Glass-Steagall Act to end the toxic symbiosis between universal banks and shadow banks. He warned that “unsustainable debts promoted by universal banks and shadow banks have created dangerously unstable financial markets that depend on frequent bailouts from central banks and other government agencies.”
2025: The conflict between equity owners and creditors becomes more apparent
By February 2025, Reuters Breakingviews was examining the tensions between private equity sponsors seeking high returns and lenders trying to protect their investments. Its analysis, “Buyout firms’ equity-debt double act is creaking,” highlighted how the low-interest-rate environment had encouraged aggressive leverage and weakened creditor protections.
The analysis also pointed to the increasing use of PIK interest and disputes over transactions that could shift value from one group of creditors to another.
The problem was becoming more complicated. Private equity sponsors had incentives to preserve ownership and avoid selling businesses at depressed valuations. Lenders, meanwhile, had to decide whether to extend loans, demand additional equity or force restructuring.
Those decisions can postpone losses, but they cannot guarantee that the underlying companies will generate enough cash to repay their debt.
2026: The warnings become a broader financial-stability concern
By 2026, the debate had expanded beyond individual portfolio companies to the wider network of institutions financing them.
In February, KBRA published its fourth-quarter 2025 Middle Market Borrower Surveillance Compendium, covering 2,416 unique global middle-market sponsored borrowers assessed during 2025 and representing more than $1 trillion in private direct-lending debt. KBRA’s findings were mixed: it described stability at the median borrower but stress at the margins, and expected a rising yet contained default rate in 2026.
In May, the Financial Stability Board published a report on vulnerabilities in private credit. It highlighted connections among private-credit funds, banks, insurers and private equity firms, alongside concerns about borrower quality, leverage, liquidity and valuation transparency. The report estimated that the private-credit market held between $1.5 trillion and $2 trillion in assets at the end of 2024 and cautioned that the market had not been tested in a severe economic downturn.
Wall Street Journal Brings Focus To Refinancing
The Wall Street Journal‘s October report sharpened the focus on refinancing by quantifying the roughly $300 billion in risky loans maturing in 2028 and 2029.
The chronology reveals a progression: warnings about leverage from 2019, warnings about rising rates in 2022, evidence of increasing credit stress in 2023 and 2024, concerns about how lenders and sponsors were managing distressed borrowers in 2025, and a more explicit focus on refinancing and systemic connections in 2026.
The Numbers Behind the Warnings
Sources: KBRA, S&P Global Ratings, Moody’s Ratings, Federal Reserve, Financial Stability Board and The Wall Street Journal. These measures cover different borrower populations and periods and should not be treated as directly comparable.
The Maturity Wall Is A Deadline, Not The Origin Of The Problem
The $300 billion figure is significant, but it measures debt coming due in 2028 and 2029. It does not represent the total outstanding debt of private equity-backed companies, nor does it indicate how much will ultimately default.
Some borrowers will refinance successfully. Others may repay loans, receive new equity from sponsors or sell assets. Still others may negotiate extensions or restructurings.
The risk lies in the combination of high leverage, expensive borrowing, weak cash generation and limited refinancing options. A company that could comfortably service its debt when interest rates were low may struggle when those costs rise. If its earnings also deteriorate, refinancing becomes more difficult precisely when it is most necessary.
Three indicators deserve attention.
Debt relative to earnings. Debt-to-EBITDA ratios measure leverage, but the quality and durability of the earnings figure matter just as much. A high ratio leaves little room for operating setbacks.
Interest coverage. Companies that cannot comfortably cover cash interest from operating earnings have less capacity to absorb higher rates or declining revenue.
Payment-In-Kind (PIK) interest and distressed extensions. These arrangements can be legitimate restructuring tools, but their increasing use may signal that borrowers are struggling to meet their original obligations. Adding unpaid interest to principal can make the eventual repayment burden larger. PIK interest also complicates default statistics. A company that has not missed a payment may still be under heavy financial pressure if its lender has agreed to defer interest or extend the maturity.
Why The Problem Extends Beyond Private Equity
Private equity-backed companies obtain financing from a range of sources, including private-credit funds, syndicated-loan markets and banks. Private-credit funds themselves also borrow from banks, while insurers and pension funds invest in the funds and other private-market vehicles.
This creates a web of exposures. A default at a portfolio company can affect a direct lender, which may in turn affect its investors or financing counterparties.
In October 2025, Reuters reported Moody’s data showing that, as of June 2025, U.S. banks had lent nearly $300 billion to private-credit providers and $285 billion to private equity funds, with a further $340 billion in unused commitments to those borrowers.
These figures are not the debt of private equity-owned companies. They measure a different layer of exposure, and unused commitments are not equivalent to outstanding loans. Still, they show why the health of private equity-backed borrowers matters to institutions beyond the companies themselves.
The Federal Reserve’s research on private credit and leveraged-loan markets, together with the Financial Stability Board’s 2026 report, highlights the importance of monitoring these interconnections.
The concern is not that every default will cause a financial crisis. It is that stress across highly leveraged borrowers, lenders and financing counterparties could become correlated during a severe downturn.
Software Debt Adds Another Layer Of Uncertainty
Software companies account for roughly one-third of the risky loans in the maturity wall identified by the Wall Street Journal. Many were acquired during the period of cheap financing, when investors placed high valuations on recurring revenue and expected growth. Now, some face a harder environment. Higher borrowing costs can erode profitability, while competition and artificial intelligence may threaten the prospects of certain businesses.
A company facing a large refinancing requirement may find that lenders are less willing to extend credit if its earnings outlook has weakened. Even a business that remains operationally viable could face a painful restructuring if its debt is too large relative to its current valuation. This is why the maturity schedule should be examined alongside sector concentration, leverage and earnings quality.
Why Years Of Warnings Matter
The significance of the chronology is not that every warning predicted the exact size or timing of the current maturity wall. Rather, the warnings identified a series of related vulnerabilities that have become increasingly interconnected.
In 2022, higher interest rates threatened the economics of leveraged acquisitions. In 2023 and 2024, research documented deteriorating borrower conditions and the use of restructuring tools to manage financial stress. In 2025 and 2026, attention increasingly turned to the opacity of private-credit portfolios, the connections between funds and banks, and the risks associated with refinancing large amounts of debt.
Journalists, credit analysts and regulators were examining different parts of the same problem. I have focused on tracing the connections between portfolio-company debt, private-credit funds, banks and insurers.
The evidence does not establish that all private equity-backed companies are overleveraged or that the maturity wall will produce a systemic crisis. But it does make it difficult to portray the underlying risks as a sudden discovery.
The more important questions are whether the debt can be serviced from operating cash flow, how much must be refinanced on less favorable terms, and whether lenders and sponsors have sufficient capacity to absorb losses if more borrowers fail.
The $300 billion maturity wall is a deadline. The financial vulnerabilities behind it are a story years in the making.
This article was originally published on Forbes.com
