Things are about to get even harder for distressed retail chains thanks to rising interest rates.
After years of low rates fueled a private equity "feasting" on retail firms, the number of troubled chains has tripled over the past six years, and is now at its highest level since the Great Recession.
Moody's Investors Service says that 19 of these companies have "well over" $3.7 billion in debt that matures over the next five years. Roughly 30 percent of that total is due by the end of next year.
The timing for higher rates couldn't be worse. Revenue continues to tumble as the debt maturities swell.
Though credit markets have so far remained strong, allowing many retailers to proactively refinance their debt, Moody's warns that rising U.S. interest rates could abruptly change those conditions. The Federal Reserve is expected to raise rates three times this year, with the first such move anticipated on Wednesday.
"If interest rates do go up it's going to be harder for them to find more favorable options," Murali Gokki, a managing director in AlixPartners' retail practice, told CNBC. "The clock is ticking."
The 19 distressed retailers on Moody's list have already been pummeled by a confluence of headwinds, including fierce competition from Amazon, T.J. Maxx and Zara. The growth of these chains has contributed to oversupply in the U.S., which started during a period of overexpansion in the 1990s. That, in turn, has caused many companies to compete on price.