NEW ZEALAND Trends and Developments Contributed by: Josh Cairns, Dominic Toomey, Stuart Evans and Matt Mazenier, Simpson Grierson
• capital expenditure or distribution restrictions However, private credit lenders are often willing to adapt these covenants to reflect the borrower’s needs, sector characteristics or sponsor requirements in a manner that the bank market may historically have struggled to accommodate. This flexibility, combined with the ability to propose rapid execution timelines, remains a potential competitive advantage over the banks. Interest structuring and PIK options Another point of differentiation between New Zea - land’s domestic banks and private credit lenders is the ability of private credit lenders to offer payment- in-kind (PIK) interest mechanisms; a feature that the major banks have historically been unable to provide outside of a real estate development funding context. PIK options allow borrowers to defer cash interest payments, improving liquidity in early-stage growth periods or during transitional phases following acqui - sition or restructuring. This is particularly attractive in leveraged buyout scenarios or during times of distress Loan transferability provisions in New Zealand private credit finance documents tend to be more permis - sive than those typically seen in English or Australian deals. Borrower consent requirements are often lim - ited, and lenders may retain the right to transfer freely following any event of default. However, in practical terms, the absence of a deep or liquid secondary mar - ket reduces the likelihood of transfers. Convergence with international deal terms where cash preservation is prioritised. Transferability and secondary market considerations There is increasing pressure, particularly from region - al and global private equity sponsors, to incorporate terms that have become well-established in the US, English and Australian finance markets into New Zea - land law documents. Such provisions include more sophisticated covenant settings (including more extensive and permissive financial covenant defini - tions), more restrictive lender transferability rights,
and more extensive “permitted” definitions and bas - ket constructs, among other things. This pressure is often driven by a desire from global sponsors to align the financing terms across their portfolio companies, regardless of jurisdiction. Given the “market setting” nature of some of these terms, private credit funds with the appetite to deviate from traditional New Zealand market norms are well positioned to win competitive processes and shape market evolution on deal terms. This is particularly the case for global credit funds which are well acquainted with these terms in other markets. Outlook for 2026 and Beyond Whilst New Zealand’s private credit market remains at an earlier stage of development than many com - parable jurisdictions, momentum is clearly building. Several themes are likely to shape the coming years. • Growing borrower acceptance of private credit as a viable alternative to bank financing, particularly among mid-market corporates and sponsors. • Infrastructure financing opportunities, which may become the largest driver of private credit activity in the medium to long term. • Increased capital supply, fuelled not only by global asset managers but also the ongoing incentivisa - tion of foreign investment at a national policy level, which has provided domestic credit funds with enhanced deployment capacity. • Greater institutionalisation of deal terms, as offshore funds help to harmonise New Zealand’s documentation standards with those seen in the English and Australian markets. • Opportunities for lenders willing to be flexible, particularly in navigating intercreditor issues and offering tailored financing structures and terms in a market still transitioning away from bank domi - nance. Overall, the trajectory is positive, and New Zealand appears poised to continue evolving into a more sophisticated and diversified private credit market over the coming years.
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