Maturity walls over the next two years will require many non-bank financial institutions (NBFIs) to remain active in issuing new debt in order to manage refinancing risk and retain funding flexibility, according to Fitch Ratings in a new report.

Spread tightening in 2024 and Fed interest rate cuts late in the year helped spur NBFIs to tap the debt markets more frequently, a trend Fitch expects will continue and that is particularly noteworthy for business development companies (BDCs), according to Senior Director Chelsea Richardson.

“The depth of the BDC market will be tested as maturities ramp through 2026 and funding needs grow across the sector,” said Richardson. “Rated BDCs have nearly $20 billion of debt maturing in 2025-2026 and will compete for investor attention, with most issuance coming from growing perpetual non-traded BDCs.”

Aircraft lessors also have a meaningful amount of debt coming due this year along with purchase commitments totaling around $23 billion. “While macro headwinds could pressure certain lessees, aircraft delivery delays could also reduce near-term funding needs while operating cash flows should continue to benefit from the sector’s recovery,” said Senior Director Johann Juan.

Also likely to be active in the coming year are non-bank mortgage companies, although several have been active in paying down much of its 2025 maturities over the past 15 months. That said, “2025 maturities of $1.5 billion remain, which could lead to greater asset encumbrance if this is ultimately replaced by secured financing,” said Senior Director Eric Orenstein.

The common denominator is sufficient liquidity, which all NBFI subsectors have in order to address 2025 debt maturities (which represent 11% of outstanding unsecured debt). While not expected, meaningful refinancing of maturing unsecured debt with lower-cost secured debt could push some issuers’ unsecured funding below downgrade triggers.

Fitch’s ‘North American NBFI Refinancing Risk Report: 2025’ is available at www.fitchratings.com