AUSTRALIA Trends and Developments Contributed by: Lewis Grimm, Alastair Gourlay, Dean Bao and Emily Tsoi, Jones Day
the more conservative approach of domestic investors, the still-developing nature of local intercreditor practices and a lack of depth and liquidity in the secondary trading market, com- pared to their US and European equivalents. Although direct lenders differ among themselves in their ability to finance all deal sizes, as a class of capital they now supply loans ranging from AUD10 million to well above AUD1 billion, giv- ing sponsors leverage and documentation terms that mirror New York precedent. Execution certainty is the key advantage because credit committees typically sign off within six weeks and impose fewer conditions precedent. Pri- vate equity firms have responded by doubling deployment: according to Mergermarket data, in 2024 they invested about USD34.5 billion across 168 Australian deals and are on pace to exceed that figure in 2025. Banks remain vital for revolving facilities and hedging lines, yet the momentum has clearly shifted toward blended structures that pair a private credit term loan with bank liquidity support. Two headline deals show how modern financ- ing structures work in practice. Blackstone’s USD16.2 billion purchase of data centre opera- tor Airtrunk used a multi tranche private credit package alongside bank revolvers to fund rapid expansion. Meanwhile, Abu Dhabi’s ADQ acquired a controlling stake in infrastructure developer Plenary Group for roughly USD647 million, relying on an Aussie, Term Loan B placed with local institutions and Asian credit funds. Both transactions closed on tight timetables and illustrate how covenant lite terms and local security packages coexist in large Australian buy-outs. Banks remain competitive, especially on pricing and continue to anchor deals in sectors where
certainty of funding and long-standing relation- ships matter. Revolvers, working capital lines and stapled financing proposals remain firmly in the bank domain. Liability management and the rise of defensive terms While Australia has not yet experienced a full- scale liability management wave similar to the US in recent years (and increasingly the case in Europe), the possibility of Australian sponsor- driven debt reshaping is on the radars of many lenders and is becoming a prominent front-end discussion point when reviewing debt documen- tation. Global sponsors and their legal advisers are increasingly seeking flexibility that could potentially be used to implement techniques such as: • Uptiering – creating structurally senior tranch- es without refinancing existing lenders. • Dropdowns – moving valuable assets into unrestricted subsidiaries to support new financing. • Non-pro rata exchanges – favouring friendly creditors with improved terms. In early 2024, according to public reports, a sponsor proposed to move valuable assets into a non‑guarantor subsidiary to raise struc- turally senior debt in a manoeuvre referred to as “Chewy” after a similar notorious liability management transaction in the United States. Although the transaction was arguably permitted by the debt documents, it exposed how quickly collateral can migrate when the debt documents do not include key lender protections. Spon- sors still negotiate flexible covenant baskets and equity‑cure rights, but they must frequently agree to a raft of blocker provisions and other restrictions that are intended to ensure (with various degrees of success) that these types of
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