Distress is building across the US building products industry as suppliers to the residential construction industry grapple with weakening margins and divergence between new build and remodeling activity.

Capital structures constructed during a period of peak demand and ultra-low interest rates in the wake of the pandemic now face a looming maturity wall as the housing market remains stuck in the doldrums.

Financial sponsors, creditors and opportunistic investors are now studying how to fix borrowers’ balance sheets through liability management exercises and other alternatives.

“The problem is a lot of those credit agreements are incredibly borrower friendly and make it very, very hard to [buy the credits in the secondary market]. So the question is can you be the capital provider in that space? Can you come in with a new transaction to try to help some of these businesses out of those over levered structures?” said Rob Ruberton, a partner at Lane42 Investment Partners at Debtwire’s Private Credit Conference on Wednesday (3 June).

Suppliers serving the new construction market are in a much tougher spot than firms that specialize in repair and remodeling, said Jack Sallstrom, a managing director at Houlihan Lokey.

“The new construction market will likely face demand headwinds over a longer period relative to the repair and remodel market,” said Sallstrom, citing the recurring nature of weather-related repairs and the aging US housing stock as structural supports for remodeling.

Single-family home construction in non-rural areas fell nearly 10% year-over-year in the first quarter, reflecting acute affordability pressures in high-density markets, according to the National Association of Home Builders. The decline follows drops in most areas of the country in the prior three quarters after an uptick in activity in 2024.

As home builders adjust starts for new construction and manage inventory, demand across the supply chain is becoming more volatile, putting pressure on both volumes and pricing, according to sellside analysts.

Many firms, though, retain adequate liquidity, and refinancings have bought time for some issuers, the analysts said. They said the sector appears to be entering a slow-burn phase of credit deterioration with stress accumulating incrementally.

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There is a hierarchy of stress across subsectors of building products with lumber and commodity product distributors among the most exposed to the construction slowdown, said a buysider. These firms face falling volumes and margin compression thanks to soft demand for new construction.

Bain Capital and Platinum Equity-backed US LBM reported last month that its first quarter adjusted EBITDA plunged over 80%, a sequential double-digit decline for the distributor of wood products and specialty materials, as reported. A group of creditors to US LBM has organized with Paul Weiss under a cooperation agreement.

Roofing follows lumber, with moderate to high stress driven by excess capacity, weak weather-related demand in 2025 and ongoing destocking by contractors, said the buysider.

S&P Global Ratings downgraded roofing distributor Gulfeagle Supply to B- late last month, warning that leverage is rising due to a decline in shipments and increasing competitive pricing pressure. The family-owned business is worried that its larger competitors are maintaining low prices, even with higher input costs, in order to boost market share, S&P said.

Installation trades face more moderate pressure, supported by diversification into commercial and industrial work. Insulation providers also appear more resilient, benefiting from structural demand tied to stricter building codes and energy-efficiency upgrade incentives.

Blackstone’s Interior Logic has been working with Kirkland & Ellis as the interior design and installation services provider buckles under lower installation volumes, which have been straining earnings, as reported. A group of creditors advised by Gibson Dunn and Greenhill have been huddling under a cooperation agreement.

Aggregates producers remain the least stressed, supported by infrastructure spending, localized markets and stronger pricing power, the buysider said.

One defining feature of the current cycle has been issuers’ ability to proactively manage liabilities.

“If you look at the credit cycle over the last 12 to 24 months, many building product names tapped the debt markets to either refinance and extend their maturities or make an acquisition,” said Sallstrom, speaking generally.

Recent transactions underscore this trend as Centerbridge-backed American Bath refinanced its capital structure in 2025, extending maturities to 2031 and exchanging 2028 unsecured notes into second lien PIK toggle notes due 2031.

Platinum Equity-backed Cabinetworks completed a pro rata liability management transaction, offering unsecured noteholders a par exchange into first lien third out notes due 2032. PrimeSource Building Brands executed a broad amend-and-extend in late 2025, pushing maturities into the next decade.

The deals have reduced near-term liquidity risk, but they didn’t address the companies’ underlying margin and demand pressures as shown by post-deal earnings.

Some sponsors in the space have stepped up to support portfolio companies they are confident have strong underlying businesses.

“If sponsors have conviction in the long-term prospects of the business, we’ve seen them buy junior or unsecured debt at a discount or provide new money,” Sallstrom said.

Oldcastle Building Envelope’s sponsor KPS purchased 93% of the architectural glass company’s USD 585m senior unsecured notes at a reduced value in late May, according to a S&P ratings report.

Distress in the space comes as industry giants are easily tapping debt markets to fund acquisitions with over USD 11bn market cap QXO pricing a USD 6bn loan and senior unsecured notes package at SOFR+ 200bps and 6.5%/6.875%, respectively.

Berkshire Hathaway, meanwhile, announced the USD 8.5bn acquisition of home builder Taylor Morrison Home as part of the conglomerate’s plan to form a platform for its homebuilding assets.