The Credit Edge by Bloomberg Intelligence Mudrick Sees Seven-Year Default Wave as Rates Stay Up
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Aug 14, 2025 In this discussion, Jason Mudrick, the Chief Investment Officer and founder of Mudrick Capital Management, shares his insights on the anticipated rise in debt defaults over the next seven years due to high funding costs. He highlights that the normalization of interest rates, rather than economic downturns, is driving this trend. Mudrick also dives into notable debt restructurings involving Tropicana and Yellow Pages and discusses emerging investment opportunities in innovative sectors like flying taxis.
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Rates, Not Recession, Drive Defaults
- Normalization of interest rates, not an economic downturn, is the broad catalyst driving elevated defaults across many industries.
- Expect an elongated distressed cycle with elevated defaults for the next five to seven years rather than a short spike.
LMEs Elongate The Distressed Cycle
- Liability management exercises (LMEs) and distressed exchanges are elongating the default cycle by keeping ownership static while extending maturities.
- Including exchanges, Mudrick estimates an ongoing 4–6% combined annual default/exchange rate on a much larger market.
Size Up To Influence LMEs
- Join or size into steering committees to avoid being disadvantaged in non-prorata LMEs and to secure better economic treatment.
- Allocate enough capital to be a top holder (often $100m+) to influence outcomes in complex restructurings.