EXCLUSIVE: Debt Maturity Cliff Could Unleash a New Wave of Bankruptcies in 2027

The next phase of the U.S. distress cycle could come down to one thing: debt maturities.

Companies and property owners that locked in cheap financing years ago are increasingly facing a very different lending environment, where refinancing can leave them with a multimillion-dollar funding gap.

While many borrowers have managed to extend or restructure their debt, those options may not last forever — setting the stage for more note sales, foreclosures, restructurings, and bankruptcies.

In the second part of exclusive Q&A with Greg Corbin, president and founder of Northgate Real Estate Group, Corbin explains why maturing debt could become a major catalyst for distress through 2027.

He also discusses what separates successful restructurings from liquidations, why bankruptcy doesn’t necessarily mean an underlying asset is bad, and why he expects distressed transactions to play a much larger role in the market next year.

Many companies were locked in low-cost debt several years ago.

As those maturities come due, how significant a challenge will refinancing be for businesses and their lenders? Maturities will be one of the biggest catalysts for the next phase of the distress cycle.

A property that supported a 3% or 4% loan several years ago does not support the same amount of debt at today’s rates.

Even if the property is performing, the proceeds available from a new lender may be materially below the existing loan balance.

That’s the problem.

The borrower may have a perfectly viable asset but still face a multimillion-dollar refinancing gap.

Someone has to fill that hole: the borrower, new equity, the existing lender, or a new capital provider.

If nobody does, that’s when you start seeing note sales, restructurings, foreclosures, and bankruptcies.

What separates companies that successfully restructure from those that ultimately liquidate? Usually, it’s whether there is a viable business or asset underneath the debt.

If the underlying asset generates sufficient value but the capital structure is broken, there are many ways to address the problem.

You can extend debt, reduce debt, bring in new capital, sell assets, or restructure through bankruptcy.

If the underlying economics themselves don’t work, restructuring the balance sheet only buys time.

The other major factor is recognizing the problem early enough.

The more liquidity and time you have when you start dealing with distress, the more options you have.

Waiting until there’s no cash and a foreclosure or maturity is days away dramatically reduces those options.

What’s one misconception investors have about today’s bankruptcy market? One of the biggest misconceptions is that bankruptcy automatically means there’s something wrong with the underlying asset.

A property may have been worth $20 million when it was financed at 3%, and today it might be worth $10 million with $14 million of debt.

It’s underwater, but that doesn’t necessarily mean there’s anything wrong with the property.

It means the capital structure no longer works.

That’s also why bankruptcy can create opportunity.

Chapter 11 can provide a mechanism to separate the asset from an unsustainable capital structure, establish market value, and put the property into the hands of a buyer with a basis that makes sense today.

The mistake is assuming that bankruptcy creates distress.

More often, bankruptcy is simply the process used to resolve existing distress.

Looking ahead to 2027, do you expect the next big wave of deals to come from healthy M&A or from distressed transactions? What catalyst could accelerate that shift? I think distressed transactions will be a much bigger part of the market in 2027.

There is simply too much debt that originated in a completely different interest-rate and valuation environment and still has to be dealt with.

A lot of those loans have already been extended or modified a few times.

At some point, another extension stops being a solution.

The biggest catalyst will be maturities.

As more loans come due, owners will have to refinance, sell, contribute additional equity, or restructure.

If values haven’t recovered enough and rates remain elevated, many won’t have enough proceeds to refinance their existing debt.

I also think liquidity is an important catalyst.