AUSTRALIA Trends and Developments Contributed by: Lewis Grimm, Alastair Gourlay, Dean Bao and Emily Tsoi, Jones Day
it still introduces lead time and execution risk, especially in competitive bid situations, and will vary depending on the investor’s profile (eg, low- risk vs high-risk jurisdictions) and the sector (eg, critical infrastructure vs non-sensitive assets). ACCC merger reforms From 2026, all notifiable mergers will require mandatory pre-clearance from the competition regulator. This replaces Australia’s prior volun- tary regime and could significantly impact the front-end of deal timetables. For lenders, this means longer periods between signing and drawdown, requiring attention to conditions precedent, MAC clauses and material approvals. Thin-capitalisation reform The 2023 changes to thin-capitalisation rules have narrowed the deductibility of interest expense, particularly in related-party and off- shore structures. Interest is now generally capped at 30% of tax EBITDA, subject to excep- tions and the availability of alternative tests, in line with OECD guidelines. This affects debt sizing and often pushes sponsors to maximise third-party debt inside operating companies and limit shareholder loans. Lenders, in turn, typically respond by analysing structural subordination risk and building extra headroom into leverage covenants. Financial assistance and the whitewash approval Section 260A of the Corporations Act 2001 bars a company from materially helping anyone buy its shares unless the aid is immaterial or shareholders approve it by special resolution. The process, known as the financial assistance whitewash, requires a 75% vote, fourteen days’ notice to shareholders and, for public com- panies, advance lodgment with the Australian Securities and Investments Commission. Com-
pleting those steps typically takes four to six weeks for public companies (although private company whitewashes can be quicker), during which target subsidiaries cannot grant guaran- tees or asset security. Market access: the rise of the Aussie TLB Base rate volatility, FX mismatch and investor selectivity have made offshore execution more expensive and unpredictable, and the volatile United States high‑yield and syndicated loan markets have pushed arrangers to develop an Australian alternative that keeps global cove- nant‑lite terms but uses Australian governing law (typically New South Wales or Victoria) and avoids the frictions of cross-border syndication. The “Aussie TLB” syndicates locally to banks, domestic pension investors and Asian credit funds, limiting cross‑border judgment‑enforce- ment and security registration risks. Demand is strongest for AUD250 million to AUD750 million financings, too large for a single unitranche yet too small for a full United States syndication. Sponsors like the format because it preserves portability, incremental debt capacity and generous EBITDA add‑backs while keeping collateral under local control. The lenders like the reduction in cross-border judgment enforce- ment risk and it is an attractive option to APAC- based institutional lenders seeking Australian exposure. Aussie TLBs offer the following. • Covenant-lite terms, generous EBITDA add- backs, and incremental facilities. • Local syndication to banks, superannuation funds and Asian credit funds. • Lower enforcement risk, given the laws of Australian jurisdictions govern both credit and security documents.
37
CHAMBERS.COM
Powered by FlippingBook