Companies Move to Refinance Sooner: 'Better Off to Lock It In' — WSJ

By Mark Maurer and Jennifer Williams

Many companies are jumping on lower interest rates to refinance their debt sooner than later, choosing not to wait for the possibility of further declines as the economy and markets only become more difficult to read.

Businesses typically replace old debt with new to pay a lower interest rate, change the terms or consolidate debt. The corporate bond market is particularly strong as credit spreads, or the extra yield investors demand to hold them instead of U.S. Treasury bonds, have narrowed to their smallest percentage since the 1990s.

The Federal Reserve has been cutting interest rates, which encourages corporate borrowing, amid signs of a slowing jobs growth. But fear of volatility — which could send rates spiking — and President Trump's mercurial initiatives have prompted companies to plan more defensively. Companies such as Savers Value Village, Elanco Animal Health and Hovnanian Enterprises are taking liquidity while it is available, rather than waiting closer to the maturity date on their loans.

Companies are weighing their financing strategies amid fiscal policy uncertainty, inflation, a fight over the Fed's independence, and geopolitical strife in places like Venezuela, Iran and Greenland.

U.S. corporate-debt refinancings totaled roughly $425 billion in 2025, up 5% from the previous year and the highest level since 2020, according to Dealogic.

"If you can get out now and do something now, that is 100% the desire," said Amol Dhargalkar, managing partner and chairman at Chatham Financial, adding that companies aren't necessarily borrowing more than they need. "You know what the market is right now. And if you waited, who knows what the world could look like?"

Savers Value Village pushed out its debt maturity by around four years by refinancing in September. The thrift retailer's executives had planned to take action in the next 12 to 18 months with the debt maturing in 2028, but started considering refinancing last summer because of the appealing market conditions, said CFO Michael Maher.

"We had a window where our strong credit profile matched up with a really great market," he said. "There was no reason to wait and take the chance that that may not continue to be available again."

Along with the later maturity, the company now has more favorable spreads on its variable rate, equating to roughly $17 million in annual savings on around $750 million in debt, which the CFO said outweigh the one-time costs of nearly $33 million tied to refinancing early. Savers Value Village also expanded its revolving line of credit by $55 million and can now pay down debt without a penalty thanks to the September transaction.

Meanwhile, Elanco Animal Health, the Indianapolis-based producer of medicines for pets and livestock, refinanced a $2.1 billion term loan into three new debt facilities in recent months. The debt wasn't due until 2027, but the company sought to push the maturity out as far as possible, Chief Financial Officer Bob VanHimbergen said.

The changing rates coincided with the company's typical window to refinance before a maturity, making it the right time to act, he said.

"Because of potential for market volatility with the geopolitical environment, we wanted to hit the market knowing that we were better off to lock it in," VanHimbergen said, referring to political announcements related to things like tariffs and the Fed.

Hovnanian Enterprises, the Matawan, N.J.-based home builder, refinanced $900 million in senior notes last fall, saving $12 million a year in interest. The company wanted to avoid hefty penalties for paying down its debt early, but also not wait too long and run the risk of facing deteriorating market conditions, CFO Brad O'Connor said.

Hovnanian hasn't always made the right call, he said. In 2015, the company opted to wait closer to maturity for almost a year because it didn't want to pay a roughly $70 million prepayment penalty. But when the company was ready to refinance, the high-yield market had closed to home builders and other industries, he said.

"It hurts a little, but we know what happens. If you try to get too cute and too precise on exact timing, you can get caught," O'Connor said.

Other companies are in the market to refinance.

Phillips Edison, a Cincinnati-based real-estate investor that owns grocery-anchored shopping centers, expected to refinance up to $400 million on the public debt markets by June, ahead of a 2027 maturity, Chief Financial Officer John Caulfield said.

The REIT is watching the direction of credit spreads and Treasury rates. But recent reports of lower unemployment claims coupled with an easier pace of inflation, "I think ... shows the tension in the market that exists," Caulfield said.

"We're going to look this year to find the right appropriate window of stability," he said. "We're trying to figure out if we can get another 10 basis points off or things like that."

Write to Mark Maurer at mark.maurer@wsj.com and Jennifer Williams at jennifer.williams@wsj.com