Oak Tree Capital warns: $200 billion high-yield debt faces "maturity wall"; wave of corporate liquidations may erupt

According to The Smart Finance APP, distressed asset investment giant Oaktree Capital Management has stated that, as financing costs remain elevated and a large number of debts are set to mature over the coming years, companies holding approximately $200 billion in debt are facing a reckoning.

Danielle Poli, Managing Director and Co-Portfolio Manager at Oaktree Capital, said in an interview on Tuesday: “If Federal Reserve Chairman Kevin Warsh truly focuses on fighting inflation and drives interest rates even higher, this will put pressure on some borrowers. At the same time, we are facing a 'maturity wall.'”

According to Oaktree Capital, about $200 billion in debt from roughly 250 borrowers yields over 15% or is priced below 90 cents on the dollar. Poli stated that this will be “the next wave of opportunistic investment that we are about to see.”

However, Poli pointed out that for distressed debt investors, now is not yet the time to “go all in.” She added that the so-called “liability management exercises” carried out in the early 2020s only served to “kick the can down the road,” and companies are now facing “hard maturity dates” in 2027 and 2028.

“This could create the ‘distress moment’ we have been waiting for,” Poli said.