Navigating the 2025 Bankruptcy Cycle: Strategic Insight for Asset-Based Lenders in Retail and Industrials

July 2025

As 2025 progresses, a clear pattern is emerging: bankruptcy filings are surging to their highest level in five years, particularly within the retail and industrial sectors. Yet, systemic risk remains contained. The default rates on leveraged loans and high-yield bonds, as cited by the FSOC’s 2024 report, are elevated but remain below crisis thresholds. This divergence suggests a correction that is acute but contained—a targeted wave of distress rather than a system-wide unraveling.

For asset-based lenders (ABLs), this moment is not merely about managing risk, but about seizing a strategic inflection point. With rising refinancing challenges, inflation-driven margin compression, and shifting consumer behavior, asset-backed borrowers in sectors like retail, manufacturing, and construction are increasingly vulnerable. ABLs and their advisors now have a critical role in facilitating orderly workouts, recoveries, and recapitalizations that will define the financial landscape for years to come.

A Five-Year High in Bankruptcies: The Sectoral Breakdown

Bankruptcy filings are accelerating and are on track to eclipse the five-year high watermark by mid-2025. Retail and industrials are leading the pack, according to Bankruptcy Data, which recorded 48 retail bankruptcies in 2024, up from 34 in 2023—a 41% year-over-year increase.

In the retail space, companies like At Home Group Inc. and Joann serve as bellwethers of broader sectoral issues. Structural overexpansion fueled by the 2020–2021 stimulus environment, paired with inflation that continues to suppress discretionary consumer spending, has undermined profitability across home goods and specialty retail. E-commerce’s gains, though stabilizing, have not reversed the tide of underperforming brick-and-mortar stores.

The result: continued restructuring pressure, particularly for mall-based and specialty formats, alongside mounting implications for commercial real estate. Asset redeployment opportunities—especially in California, New York, and Texas—are increasingly concentrated in store liquidations and FF&E (furniture, fixtures, and equipment) monetization.

Industrials, meanwhile, face their own triad of pressure points:

• Input cost volatility (notably in energy, labor, and raw materials),
• Elevated interest rates, straining capital-intensive models, and
• ESG and automation gaps, which are hindering modernization and efficiency.

Bankruptcy activity is climbing across logistics, oil and gas equipment, and regional sub-industrial manufacturing—evidenced by the filings of KTRV, Canoo, and other smaller regional operators. These are often subscale companies—neither large enough to withstand prolonged margin pressure nor agile enough to pivot operationally without external capital or strategic intervention.

Middle-Market Firms in the Crosshairs

Middle-market businesses—those with $50 million to $500 million in assets under management—are emerging as the flashpoint of this cycle. Many exhausted their pandemic-era liquidity buffers and now face a tighter lending environment. NFIB and Federal Reserve data point to a bifurcation: some remain well-capitalized, while others struggle with declining liquidity ratios and rising debt service burdens.

The implications for ABLs are profound:

• Inventory and Equipment Monetization: Asset redeployment is gaining traction as firms seek cash flow relief without taking on more leverage.
• Turnaround Advisory: Demand is spiking for interim CFOs and operational triage, especially in sectors with weak pricing power or volatile demand cycles.
• Loan Resolution Support: Non-performing loan management is becoming more complex as middle-market borrowers face limited refinancing paths.

A Closer Look at Refinancing Risk: The Tiered Maturity Ladder

Refinancing challenges are not uniform—they are unfolding in waves, tied directly to borrower revenue scale and maturity timing.

• Large-Cap Firms ($1B+ Revenue) are staring down a wall of maturities from 2025 to 2028. While these borrowers retain stronger capital market access, the sheer volume of demand—$7.9 to $10 trillion depending on debt classification—risks crowding out smaller players.
• Mid-Market Firms ($50M–$1B Revenue) are especially exposed. Heavily reliant on bank loans, many are already in the thick of the 2025–2028 maturity window, but without the balance sheet or market access to absorb higher borrowing costs.
• Smaller Firms (<$50M Revenue) show a pronounced maturity spike in the 2033–2036 range. This delayed stress may appear distant, but without proactive balance sheet management now, they will face refinancing scarcity just as broader market liquidity may tighten again.

This tiered risk structure offers a roadmap for lenders and distressed investors: anticipate a rolling series of restructuring opportunities, rather than a single peak year of distress.

Sectoral and Regional Hotspots: Where to Watch

Beyond the sector-level indicators, geographic concentrations of filings are providing further clarity. California, Texas, and New York are home to over half of all bankruptcies year-to-date, underscoring a blend of urban consumer overbuild, high-cost industrials, and CRE exposure. For lenders and advisors, this points to region-specific strategies:

• California: Focus on liquidation support and lease negotiations tied to failed retail chains.
• Texas: Emphasize industrial turnaround strategies, particularly in oilfield services and logistics.
• New York: Leverage real estate valuation services to navigate price dislocations and uncover opportunistic entries.

Capital Market Context: Pressure with a Paradox

Despite elevated bankruptcies, some parts of the capital market are still remarkably active. S&P Global reports that March 2025 saw the highest private equity and venture capital deal volume in a decade. But this surge masks underlying instability—many of these transactions are distressed roll-ups or take-private restructurings.

CEPRES private market data also indicates record usage of NAV loans and continuation vehicles suggests that private equity sponsors are wrestling with illiquidity. Many firms are using short-term capital solutions to delay exits, leaving portfolio companies in limbo.

This dynamic presents lenders with a dual-edged opportunity: work collaboratively with sponsors on structured solutions or step in when those mechanisms fail, offering more permanent capital or recovery pathways.

2025: The Early Phase of a Multi-Year Distress Cycle

While some market watchers have floated the term “Distress Supercycle,” the evidence supports a more measured view. This is not a singular event, but a prolonged adjustment across the lower and middle tiers of the corporate economy.

Rising costs, interest rate inertia, and changing market expectations will continue to reshape credit access and capital structure sustainability across multiple industries. For financial professionals, this evolving environment demands:

• Early positioning in large-cap refinancing scenarios to anticipate divestitures and asset sales.
• Mid-market restructuring leadership to help firms navigate near-term refinancing cliffs and operational resets.
• Forward-looking engagement with small-cap borrowers, preparing now for a more severe liquidity crunch in the 2030s.

Conclusions

2025 is not just a turbulent year. It’s the beginning of a reshaped financial landscape that will continue to evolve through the end of the decade. For asset-based lenders and borrowers alike, the right partners and the right strategies will determine who falters and who forges ahead. We are here to help by guiding you through the uncertainty with the expertise, tools, and insight to unlock opportunity amid volatility. With this in mind, we encourage you to reach out to our highly experienced team today at info@hilcoglobal.com to discuss current challenges with your business or a business in your portfolio. By applying data-backed insight and seasoned operational judgment, we can assist you to not only survive distress—but emerge from it stronger.

 Hilco Global Turnaround & Restructuring Practice

The Hilco Global team works with publicly held companies, private corporations and family businesses worldwide to deliver best in class turnaround, workout, crisis and interim management, corporate restructuring bankruptcy, financial advisory and distressed M&A services.

 Our team are pioneers in the turnaround and restructuring advisory space and experts across the full spectrum of industries, ranging from healthcare and retail sectors to oil and gas, manufacturing and distribution.

 Our industry leadership in this area is a tribute to our deep expertise in bankruptcy law and the bankruptcy process. We have a team of experienced attorneys who are skilled at navigating the complex legal and regulatory landscape of bankruptcy proceedings, and are able to provide clients with expert guidance and advice throughout the process.

 Another of our strengths in bankruptcy strategy advisory is the ability to develop customized and innovative solutions to address the specific needs of clients. We are skilled at working with all stakeholders involved in a distressed situation, and are able to develop comprehensive bankruptcy plans that are in the best interests of all parties involved.

 In addition, Hilco Global is known for possessing vast expertise in asset valuation and disposition, which is a critical component of any bankruptcy case. We are able to provide accurate and reliable valuations of assets, and are skilled at developing disposition strategies that maximize value for all stakeholders involved.

Through a rapid and pragmatic approach to decision making and implementation, we are able to address our clients’ urgent situations and challenges with great efficiency and effectiveness. Starting with a proprietary diagnostic phase, we then set and implement realistic action steps designed to improve clients’ operational and financial performance, enhance their enterprise value and maximize stakeholder recoveries. This time-tested advisory architecture is highly effective and has placed our financial advisory services in great demand among middle market and other companies with a variety of capital structures and varying debt structures.