Private Credit 2025

Definitive global law guides offering comparative analysis from top-ranked lawyers

CHAMBERS GLOBAL PRACTICE GUIDES

Private Credit 2025

Definitive global law guides offering comparative analysis from top-ranked lawyers

Contributing Editors Stelios Saffos, Dan Seale, Peter Sluka, and Alfred Xue Latham & Watkins LLP

Global Practice Guides

Private Credit

Contributing Editors Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue Latham & Watkins

2025

Chambers Global Practice Guides For more than 20 years, Chambers Global Guides have ranked lawyers and law firms across the world. Chambers now offer clients a new series of Global Practice Guides, which contain practical guidance on doing legal business in key jurisdictions. We use our knowledge of the world’s best lawyers to select leading law firms in each jurisdiction to write the ‘Law & Practice’ sections. In addition, the ‘Trends & Developments’ sections analyse trends and developments in local legal markets. Disclaimer: The information in this guide is provided for general reference only, not as specific legal advice. Views expressed by the authors are not necessarily the views of the law firms in which they practise. For specific legal advice, a lawyer should be consulted. GPG Director Katie Burrington Content Management Director Claire Oxborrow Content Manager Jonathan Mendelowitz Senior Content Reviewer Sally McGonigal, Ethne Withers, Deborah Sinclair and Stephen Dinkeldein Content Reviewers Vivienne Button, Lawrence Garrett, Sean Marshall, Marianne Page, Heather Palomino and Adrian Ciechacki Content Coordination Manager Nancy Laidler Senior Content Coordinators Carla Cagnina and Delicia Tasinda Content Coordinator Hannah Leinmüller Head of Production Jasper John Production Coordinator Genevieve Sibayan

Published by Chambers and Partners 165 Fleet Street London EC4A 2AE Tel +44 20 7606 8844 Fax +44 20 7831 5662 Web www.chambers.com

Contents

INTRODUCTION Contributed by Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins p.4

LUXEMBOURG Law and Practice p.192 Contributed by Clifford Chance Trends and Developments p.207 Contributed by Linklaters LLP NETHERLANDS Law and Practice p.216 Contributed by Clifford Chance Trends and Developments p.233 Contributed by Clifford Chance NEW ZEALAND Law and Practice p.238 Contributed by Russell McVeagh SINGAPORE Law and Practice p.262 Contributed by Mayer Brown Trends and Developments p.283 Contributed by Mayer Brown

AUSTRALIA Law and Practice p.10 Contributed by Jones Day Trends and Developments p.32 Contributed by Jones Day

BELGIUM Law and Practice p.39

Contributed by Clifford Chance Trends and Developments p.56 Contributed by Clifford Chance

FINLAND Law and Practice p.61 Contributed by Waselius

FRANCE Law and Practice p.83 Contributed by Clifford Chance Trends and Developments p.107 Contributed by Clifford Chance

UK Law and Practice p.288

Contributed by Latham & Watkins Trends and Developments p.316 Contributed by Latham & Watkins

GERMANY Law and Practice p.112 Contributed by Freshfields

USA Law and Practice p.323

HONG KONG SAR, CHINA Law and Practice p.137 Contributed by Mayer Brown Trends and Developments p.159 Contributed by Mayer Brown

Contributed by Latham & Watkins Trends and Developments p.348 Contributed by Latham & Watkins USA – ILLINOIS Trends and Developments p.354 Contributed by Mayer Brown USA – NEW YORK Trends and Developments p.359 Contributed by Mayer Brown LLP

INDIA Law and Practice p.164 Contributed by JSA Advocates & Solicitors Trends and Developments p.185 Contributed by JSA Advocates & Solicitors

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INTRODUCTION

Contributed by: Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins

Latham & Watkins is ranked in Band 1 in the USA by Chambers and Partners and advises sophisticated global direct lenders and pri - vate capital providers on hundreds of front- end transactions each year, including first and second lien, unitranche and mezzanine loans, and preferred equity and other junior capital. It advises across a range of deal sizes stretching from the middle market through the largest and most complicated unitranche transactions with deal sizes in excess of USD1 billion. It regularly designs and implements multi-tiered capital

structures for clients and handles subordina - tion, security, and intercreditor issues, as well as restructurings, equity co-investments and tax and regulatory matters. Its direct lending and private debt practice draws on a long his - tory of innovation and experience. With more than 150 lawyers nationwide, it advises the most active lenders, funds, credit platforms and investment managers as well as borrowers, in the full range of transactions, from the middle market to large-cap.

Contributing Editors

Stelios Saffos is vice chair of Latham & Watkins’ global capital markets practice and global chair of the hybrid capital markets practice. He advises sponsors, issuers, direct lenders

Dan Seale is the global chair of Latham & Watkins’ banking practice, where he oversees the

strategic development and vision of the practice. He specialises in representing private credit funds and financial institutions in leveraged finance transactions, with a particular emphasis on acquisition financings. With decades of experience advising on large-cap syndicated loans, middle market loans and direct loans, he has extensive knowledge of the global finance market and its key participants. He is ranked by Chambers and Partners in Band 1 for private credit and he is a leader in the direct lending sector.

and underwriters on investments and financings. His extensive experience spans senior and junior lending, IPOs and high-yield bonds. He advises on more than 485 lending and private credit deals, more than 185 high- yield offerings and more than 220 IPO and other equity offerings. He guides the firm’s global hybrid capital team, advising on market- leading hybrid deals to fill gaps in capital structures between senior debt and control equity, and to finance acquisitions and growth. He is ranked by Chambers and Partners in Band 1 for private credit and is also ranked in the banking and finance and capital markets: debt and equity categories.

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INTRODUCTION Contributed by: Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins

Peter Sluka is the global co-chair of Latham & Watkins’ hybrid capital practice. He

Alfred Xue serves as the global vice chair of Latham & Watkins’ banking practice. He represents private credit funds and direct

focuses on representing clients in private debt and alternative capital financings, as well as traditional capital markets transactions. As the private capital markets have expanded significantly, he has developed a niche practice representing non-traditional financing sources, setting him apart from peers who focus primarily on traditional capital markets. He is a sought-after advisor for direct lending firms and other alternative capital providers, including HPS Investment Partners, Carlyle Global Credit, Neuberger Berman, Oak Hill Advisors, Goldman Sachs Asset Management, Ares Capital and Crescent Capital.

lenders in leveraged finance transactions. He is ranked by Chambers and Partners in Band 1 for private credit and is also ranked in banking and finance. Throughout his career, he has led hundreds of unitranche, direct lending and other private credit transactions with an issuance value exceeding USD100 billion in the last five years alone.

Latham & Watkins 1271 Avenue of the Americas New York, NY 10020 USA Tel: +1 212 906 1200

Email: pr@lw.com Web: www.lw.com

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INTRODUCTION Contributed by: Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins

Navigating Opportunities and Challenges in the Global Private Credit Market The private credit market has emerged as a for - midable force in the global financial landscape, offering a compelling alternative to traditional syndicated bank lending. The Private Credit Guide provides a broad overview of trends and developments in the private credit market in the most active jurisdictions around the world, including the US, the UK and beyond, and a detailed look at the full life cycle of a private credit transaction. A Global Perspective on Private Credit Private credit, characterised by non-bank lend - ing to public and private companies, has grown exponentially over the last decade. This expan - sion is driven by a confluence of factors, includ - ing regulatory changes, investors searching for better terms and higher yields and the increasing sophistication of private credit providers. As of 2024, the global private credit market is valued at approximately USD1.8 trillion, with projec - tions suggesting it could more than double in the coming decade. The market’s growth is not confined to any single region but is instead a global phenomenon. In the United States, private credit has become a cornerstone of corporate finance, offering flex - ible and tailored solutions to borrowers. In the UK and Europe, the market is gaining traction as companies seek alternatives to traditional bank financing amidst a challenging regulatory environment. In Asia and Latin America, where the market remains dominated by traditional bank lending, we have nevertheless seen steady growth in the private credit market. Meanwhile, in emerging markets, private credit is playing a pivotal role in bridging the financing gap for mid-sized enterprises. We see this global trend continuing as established asset managers seek

increased opportunities in emerging markets, and as the best asset managers continue to outperform on their fundraising targets. Key Themes and Trends Several themes and trends that are both influ - encing market dynamics and are a result of mar - ket dynamics have emerged. Market consolidation and strategic partnerships The private credit market is witnessing a wave of consolidation, with larger firms acquiring smaller players to enhance their market pres - ence. For instance, BlackRock’s USD12 billion acquisition of HPS and Clearlake’s purchase of MV Credit are indicative of this trend. Addition - ally, strategic partnerships between banks and private credit funds are becoming increasingly common, allowing both parties to leverage their respective strengths. Citigroup’s USD25 billion partnership with Apollo and Wells Fargo’s USD5 billion collaboration with Centerbridge Partners exemplify this “co-opetition” model, which ena - bles banks to offload risk while maintaining client relationships and provides private credit funds with access to a broader range of investment opportunities. Regulatory developments As the private credit market matures, it faces increased scrutiny from regulators. In the United States, the Securities and Exchange Commis - sion (SEC) and other regulatory bodies have expressed concerns about the lack of transpar - ency in private credit valuations and potential systemic risks. In Europe, the European Central Bank (ECB) has been proactive in seeking more information on private credit exposures from banks. These regulatory developments under - score the need for private credit providers to

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INTRODUCTION Contributed by: Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins

Junior capital Junior capital provided by private credit and structured equity funds has emerged as a cru - cial financing tool for private equity firms and non-sponsored companies for a variety of uses. Private credit providers are increasingly offering junior and hybrid capital solutions that blend debt and equity elements, enabling sponsors to monetise assets effectively, de-lever debt capital structures and provide more dry powder for acquisitions. These solutions often involve preferred equity, which positions itself higher in the capital structure than common equity held by private equity sponsors but remains junior to existing creditors. These deals frequently utilise PIK structures, allowing interest payments to be deferred, thereby alleviating immediate cash flow pressures. UK-specific trends and developments The UK private credit market is experiencing its own set of trends and developments. The market has been buoyed by a favourable regu - latory environment, with the Financial Conduct Authority (FCA) taking a proactive approach to fostering innovation and competition. Addition - ally, the UK’s exit from the EU has created both challenges and opportunities for private credit providers. On the one hand, the uncertainty surrounding Brexit has led to increased caution among investors. On the other hand, asset managers have expanded their fundraising efforts by opening fund investment opportunities to high net worth individuals and family offices. This has permitted certain private credit funds to offer businesses a lower cost of capital, increasing the fund’s assets under management and maximising the deployment opportunity. Private credit provid - ers are also seizing new opportunities to fill the financing gap left by traditional banks. Addition -

enhance their compliance and reporting frame - works to mitigate potential risks. Innovative financing structures Private credit providers are continually innovat - ing to meet the evolving needs of borrowers. Hybrid capital solutions, which blend debt and equity elements, have gained traction as a versa - tile tool for optimising capital structures. These instruments allow firms to manage costs effec - tively and meet regulatory requirements without over-leveraging. Additionally, liability manage - ment transactions are becoming more preva - lent, offering both challenges and opportunities for lenders and borrowers. The increased use of payment in kind (PIK) interest, for example, allows borrowers to conserve cash by paying interest in-kind, although it also raises concerns about masking underlying financial issues. Liability management Liability management transactions have recently become a focal point in the private credit market, with high-profile and widely publicised transac - tions capturing the attention of general partners and investors alike. These transactions, which involve restructuring a company’s debt obli - gations, offer both risks and rewards. On the one hand, they can provide companies with the flexibility to manage their capital structures more effectively, potentially avoiding defaults and preserving value, and often creating option value for shareholders. On the other hand, they can lead to complex negotiations and potential conflicts between debtors and creditors and among creditors. The recent Serta decision in the United States, which involved a controver - sial liability management transaction, has high - lighted the need for private credit providers to navigate these transactions with caution and sophistication.

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INTRODUCTION Contributed by: Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins

ally, the UK’s focus on sustainable finance and ESG considerations is also shaping the private credit landscape, with an increasing number of private credit funds incorporating ESG criteria into their investment strategies. Terms, covenants and documentation Initially, the growth of private credit deals was mainly driven by the tighter terms, covenants and documentation that govern these trans - actions. Investors sought to either drive terms that were creditor-friendly or have influence in any given credit by holding positions that were far larger than traditional holds of institutional investors in collateralised loan obligation (CLO) driven broadly syndicated deals. As the market has evolved and matured, these terms have seen a loosening in the market as a result of the expansion of the private credit market and the increased competition brought on by new market entrants. That said, private credit agreements often con - tinue to feature bespoke terms tailored to the specific needs of the borrower and the risk appetite of the lender. Documentation in private credit deals is becoming increasingly sophisti - cated, reflecting the complexity of the transac - tions and the need for clarity and precision. The rise of covenant-lite or covenant-loose struc - tures, which feature fewer financial maintenance requirements on borrowers, has been a notable trend, particularly in larger deals. However, this has also led to increased scrutiny from investors and regulators, who are concerned about the potential for weakened lender protections. As a result, the most sophisticated and established private credit providers are continuing to place greater emphasis on the quality and tightness of underwriting and documentation. The most sophisticated and established private credit

shops are also focused on going back to basics with sole underwriters or tighter club deals remaining a focus and preference over larger, more aggressive deals that resemble broadly syndicated deals. The rise of asset management M&A and other asset classes The private credit market is not only expanding in terms of volume but also in the diversity of asset classes it finances. One of the most sig - nificant trends in recent years has been the rise of asset management mergers and acquisitions (M&A), driven by the need for scale and diversi - fication. Asset managers are increasingly turning to private credit to finance these transactions, leveraging its flexibility and speed of execution. This trend is exemplified by high-profile deals such as BlackRock’s acquisition of HPS and Clearlake’s purchase of MV Credit, which high - light the strategic importance of private credit in facilitating growth and consolidation in the asset management industry. Beyond traditional sponsor finance and cor - porate borrower transactions, private credit is also being used to finance a wide range of other asset classes, from real estate and infrastructure to technology and healthcare. In the real estate sector, private credit is playing a crucial role in financing development projects and acquisi - tions, particularly in the face of tightening bank lending standards. In infrastructure, private credit is being used to fund large-scale projects, such as renewable energy developments, that require significant capital investment. The technology sector, with its rapid pace of innovation and growth, is also a key area of focus for private credit providers, who are keen to support companies with scal - able business models and strong growth poten -

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INTRODUCTION Contributed by: Stelios Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins

Conclusion As we explore the rapidly expanding private credit market and map the contours of the cur - rent landscape, we urge readers to think expan - sively about how it can generate value for spon - sors, debtors and creditors. We hope that this first edition can help market participants better navigate the opportunities and challenges that lie ahead.

tial. Private credit asset-backed loans are also a developing sub-asset class, and yet another example of the expanding aperture of the private credit offering.

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AUSTRALIA

Australia

Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith Jones Day

Sydney

Tasmania

Contents 1. Private Credit Overview p.14 1.1 Private Credit Market p.14 1.2 Interaction With Public Markets p.14 1.3 Acquisition Finance p.14 1.4 Challenges p.14 1.5 Junior and Hybrid Capital p.14 1.6 Sponsored/Non-Sponsored Debt p.14 1.7 Recurring Revenue Deals and Late-Stage Lending p.14 1.8 Deal Sizes, Fund Sizes and Fundraising p.14 1.9 Impending Regulation and Reform p.14 2. Regulatory Environment p.15 2.1 Licensing and Regulatory Approval p.15 2.2 Regulators of Private Credit Funds p.15 2.3 Restrictions on Foreign Investments p.16 2.4 Compliance and Reporting Requirements p.16 2.5 Club Lending and Antitrust p.17 3. Structuring and Documentation p.18 3.1 Common Structures p.18 3.2 Key Documentation p.18 3.3 Restrictions on Foreign Direct Lenders p.18 3.4 Use of Proceeds and Acquisition Financings p.18 3.5 Debt Buyback p.19 3.6 Recent Legal and Commercial Developments p.19 3.7 Junior and Hybrid Capital p.19 3.8 Payment in Kind/Amortisation p.19 3.9 Call Protection p.19 4. Tax Considerations p.19 4.1 Withholding Tax p.19 4.2 Other Taxes, Duties, Charges or Tax Considerations p.20 4.3 Tax Concerns for Foreign Lenders p.20 4.4 Tax Incentives p.21 4.5 Non-Bank Status p.21

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AUSTRALIA CONTENTS

5. Guarantees and Security p.21 5.1 Assets and Forms of Security p.21 5.2 Floating Charges and/or Similar Security Interests p.22 5.3 Downstream, Upstream and Cross-Stream Guarantees p.22 5.4 Restrictions on the Target p.22 5.5 Other Restrictions p.23 5.6 Release of Typical Forms of Security p.23 5.7 Rules Governing the Priority of Competing Security Interests and/or Claims p.24 5.8 Priming Liens and/or Claims p.24 5.9 Cash Pooling and Hedging/Cash Management Obligations p.25 5.10 Bank Licensing p.25 6. Enforcement p.26 6.1 Enforcement of Collateral by Non-Bank Secured Lenders p.26 6.2 Foreign Law and Jurisdiction p.26 6.3 Foreign Court Judgments p.26 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights p.26 6.5 Timing and Cost of Enforcement p.26 6.6 Practical Considerations/Limitations on Enforcement p.27 6.7 Claims Against Secured Lenders Post-Enforcement p.27 7. Bankruptcy and Insolvency p.27 7.1 Impact of Insolvency Processes p.27 7.2 Waterfall of Payments p.28 7.3 Length of Insolvency Process and Recoveries p.28 7.4 Rescue or Reorganisation Procedures Other Than Insolvency p.29 7.5 Risk Areas for Lenders p.29 7.6 Transactions Voidable Upon Insolvency p.29 7.7 Set-Off Rights p.29 7.8 Out-of-Court v In-Court Enforcement p.29 7.9 Dissenting Lenders and Non-Consensual Restructurings p.30 7.10 Expedited Restructurings p.30 8. Case Studies and Practical Insights p.30 8.1 Notable Case Studies p.30 8.2 Lessons Learned p.31 8.3 Application of Insights p.31

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

Jones Day has an Australia-based private credit team that advises on Australian, New York and English law and on a range of financ - ing arrangements for borrowers, financiers and sponsors. Jones Day’s Private Credit advice encompasses every stage of the debt cycle – from structuring and documentation of initial terms, to advising on complex restructurings,

standstills, and “amend and extends”, through to advising on safe harbour, enforcement, and insolvency/near-insolvency scenarios. Within a global firm of 2,400 lawyers in 40 offices across five continents, the five partners, three of coun - sels and four associates that make up the firm’s Australia-based private credit team often advise on complex cross-border matters.

Authors

Alastair Gourlay is a Financial Markets partner and has over 20 years’ experience representing

Lewis Grimm is a Financial Markets partner and has over two decades of leveraged finance experience working on marquee deals in New York, Europe, and Australia. He

financial institutions, private credit funds and sponsors on cross-border leveraged finance and private credit transactions. In recent years, he has advised on various term loan B and unitranche acquisition financing facilities, including EQT’s acquisition of the Icon Group and TPG’s acquisition of Invocare. Alastair is ranked in the 2025 edition of Chambers Asia-Pacific for both Acquisition Finance and Corporate Finance, and is a committee member of the Asia Pacific Loan Markets Association and the Funds Finance Association.

represents financial institutions, direct and institutional lenders, and corporate borrowers on cutting-edge domestic and cross-border leveraged and investment-grade lending and high yield transactions, as well as high-profile restructuring and bankruptcy matters. Lewis’ high-profile deals include assisting the majority term-loan lenders in the restructuring of the US facility agreement of Atlas Iron through an Australian creditors’ scheme of arrangement.

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

Joanne Dwyer is a senior lawyer with more than 30 years’ experience advising the financial services industry, with a focus on superannuation, and also extensive experience advising

Kathryn Sutherland-Smith is a senior insolvency and restructuring lawyer, admitted to practice in Australia and New York. Over the past decade, she has structured and implemented

managed funds, including establishment of new funds, assisting with applications and variations of AFSLs, and regulatory advice and compliance. Joanne is ranked in the 2025 edition of Chambers Asia-Pacific for Superannuation, and is the chair of the Superannuation Committee of the Law Council of Australia and a member of the Queensland Regional Council of FINSIA (Financial Services Institute of Australia).

multibillion dollar global reorganisations through schemes of arrangement, external administrations, and proceedings under chapters 11 and 15 of the U.S. Bankruptcy Code. She has handled complex insolvency litigation and represented debtors and creditors in an array of out-of-court restructuring matters, including distressed M&A deals, capital markets transactions and refinancings. Kathryn works with private credit institutions, ad hoc creditor groups, companies experiencing financial distress and external administrators across a range of industries.

Jones Day Aurora Place Level 41, 88 Phillip Street Sydney, NSW 2000 Australia

Tel: + 61 2 8272 0500 Fax: + 61 2 8272 0599 Email: agourlay@jonesday.com Web: Jonesday.com

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

1. Private Credit Overview 1.1 Private Credit Market

or founder-owned companies, as well as to pri - vate equity (PE) sponsors and their portfolio companies. 1.7 Recurring Revenue Deals and Late- Stage Lending Recurring revenue transactions are not common in the Australian market. 1.8 Deal Sizes, Fund Sizes and Fundraising The size of private credit transactions in Austral - ian varies significantly, from under AUD10 million to over AUD1 billion. In terms of fund sizes, we have seen significant size variation ranging anywhere from under AUD40 million to more than AUD1 billion. How - ever, private credit providers have seen an influx of private credit sponsors “flooding” into the market in the past four years, enhancing compe - tition and driving down returns. Further, the Aus - tralian Securities and Investments Commission (ASIC) announced that it will pay more atten - tion to private debt markets in a recent equity markets report, which will likely cause significant headwind for the private credit industry. 1.9 Impending Regulation and Reform At the date of this Guide, there are no proposals to reform private credit regulation in Australia. Private credit lending has been the subject of review by the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation author - ity (APRA). This includes RBA commentary in September 2024 on financial stability risks from non-bank lending. The RBA has noted that the private credit sector has continued to expand, now accounting for around 11% of business lending, but this is still only a very small share of the total. The RBA concludes that risks to the

Private credit has continued to grow in Australia over the past 12 months. While the slow pace of M&A and continued high interest-rate envi - ronment has seen fewer private credit transac - tions in certain industries (ie, in the acquisition finance and property development space), this has been offset by an increase in activity in other areas of private credit, such as structured and asset finance and financing to non-ESG sectors (including coal). 1.2 Interaction With Public Markets The public debt markets continue to be quiet in Australia and we are yet to see the refinancing of private credit with public debt market products as seen in the US and Europe. 1.3 Acquisition Finance Private credit and traditional bank debt have been the preferred form of acquisition financing in Australia in the last 12 months, although we expect that the “Term Loan B” (TLB) market will pick up again in 2025. 1.4 Challenges There do not appear to be any material chal - lenges or obstacles to the continued expansion of the private credit market in Australia. 1.5 Junior and Hybrid Capital As noted in 3.7 Junior and Hybrid Capital , jun - ior and hybrid capital products are increasingly popular in Australia. In particular, we have seen an increase in the use of convertible note struc - tures for both listed and unlisted companies. 1.6 Sponsored/Non-Sponsored Debt Private credit providers in Australia are increas - ingly providing capital to public companies and/

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

stability of the financial system from non-bank lenders are constrained by the small size of the sector. APRA has similarly noted that that the private credit sector does not pose a risk to financial stability, due to the relatively small share of sys- tem-wide lending in the housing sector. How - ever, APRA has expressed concerns about the exposure of Australian superannuation funds to private credit investments. APRA announced in August 2024 that it would continue heightened supervision of unlisted asset valuations gen - erally, while ASIC announced in January 2025 that private credit is a priority for supervision. It noted that it will be undertaking a surveillance programme of private credit funds and will seek feedback to adapt its regulatory approach as necessary. 2. Regulatory Environment 2.1 Licensing and Regulatory Approval Private credit providers typically do not need a licence or regulatory approval to lend money or to take security over assets in Australia. There are, however, certain laws and regulations which providers need to be aware of, as follows. • Banking licence to carry on a banking busi - ness in Australia, a banking licence granted by APRA is required. A licence granted by ASIC is required to carry on a business of providing prescribed financial services in Australia, known as an Australian Financial Services Licence (“AFSL”), or to carry on a business of providing credit to consumers in Australia, known as an Australia Credit Licence (“ACL”), unless a relevant exemp - tion applies. However, none of these licences are required for non-bank lenders, whether

domestic or foreign, to provide credit to cor - porate borrowers. • Consumer credit providing credit to consum - ers, which requires an ACL, includes lending to an individual for personal, domestic or household purposes or for residential invest - ment properties (purchase, renovation, or improvement). An ACL is therefore generally required for residential property financing and consumer finance leasing. • Reporting private credit providers may be subject to reporting and compliance obliga - tions (see 2.4 Compliance and Reporting Requirements ), including obligations under: (a) anti-money laundering and counter-ter - rorism financing legislation; and (b) financial sector data collection legislation. • Other regulation private credit providers are also subject to general business regulation for activities in Australia. Such regulations can include Australia’s foreign investment regime (see 2.3 Restrictions on Foreign Invest- ments ), privacy laws, or consumer protection regimes. In respect of Australia’s consumer protection regimes: (a) obligations will often apply when lending to a small business, even if an ACL is not required; and (b) liability regimes for misleading and deceptive conduct and unconscionable conduct apply generally to the conduct of a business, including to conduct that does not otherwise require an ACL or AFSL. 2.2 Regulators of Private Credit Funds ASIC is the primary regulator for consumer credit and for consumer protection obligations that apply to small businesses. Private credit lend - ers are not regulated in relation to their credit activities specifically if they do not provide credit which is subject to consumer protection laws.

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

ASIC is the primary regulator of private credit funds, where the manager, promoter or trustee holds an AFSL. APRA has power to make rules and give direc - tions applicable to non-bank lenders, whether domestic or foreign, that are registered finan - cial corporations (see 2.4 Compliance and Reporting Requirements ). However, the power only applies if APRA considers that provision of finance by a non-bank lender, or a class of them, materially contributes to risk of instability in the Australian financial system. There are currently no applicable rules or directions. Private credit providers are subject to general business regulation for their activities in Australia (see 2.1 Licensing and Regulatory Approval ), and have reporting and compliance obligations (see 2.4 Compliance and Reporting Require- ments ). 2.3 Restrictions on Foreign Investments Australia’s Foreign Investment Review Board (FIRB) regulates the investment activities of “for - eign persons” in Australia under a foreign invest - ment review regime. The regime is complex, and applies broadly to the acquisition of interests in an Australian entity, business or land. Due to the tracing and association rules under the regime, a large proportion of private credit funds are classified as “foreign government investors” (FGI) and are therefore subject to more FIRB approval triggers, including nil mon - etary thresholds on acquisition. For a private credit fund classified as an FGI, typical actions by the FGI will likely be subject to FIRB approval, regardless of the value of the asset or the transaction, unless an exemption applies. One such exemption is the “money-

lending exemption”, which is applicable to cer - tain interests held solely by way of security for a “money-lending agreement”. Acquisitions where FIRB approval may be required include: • the granting of rights over shares in Austral - ian companies in connection with lending arrangements; and • security granted to secured warrants or other non-loan related instruments. 2.4 Compliance and Reporting Requirements APRA Reporting for Registered Financial Corporations Non-bank lenders may be “registrable corpora - tions” for the purposes of data collection under the Financial Sector (Collection of Data) Act 2001. A “registrable corporation” is a corpora - tion (domestic or foreign) that engages in the provision of finance in the course of carrying on business in Australia, unless an exclusion applies. Provision of finance includes, among other things: • lending money, with or without security; and • carrying out activities, whether directly or indirectly, that result in the funding or originat - ing of loans or other financing. Registration of a corporation is not required unless the corporation satisfies the following two-part test (“Threshold Test”): • the value of the corporation’s assets in Australia (consisting of debts due to the corporation resulting from financing transac - tions) exceeds AUD50 million as at the date of the most recent balance sheet (“Loan Value Threshold”); and

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

• the value of the principal amounts outstand - ing on loans or other financing that arose during the most recent financial year, where the funding or origination of the loan or other financing resulted from activities carried out by the corporation (directly or indirectly), exceeds AUD50 million (“Principal Amounts Threshold”). AUSTRAC Enrolment, Compliance and Reporting Domestic private credit providers and private credit providers that operate through a per - manent establishment in Australia are “report - ing entities” under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act). Under the AML/CTF Act, entities are “reporting entities” if they engage in “desig - nated services”, including making a loan in the course of carrying on a loans business. Obligations for reporting entities include: • enrollment with the Australian Transaction Reports and Analysis Centre (AUSTRAC); • adopting a compliant AML/CTF financing programme; • undertaking customer due diligence on their borrowers; and • providing prescribed reporting to AUSTRAC. 2.5 Club Lending and Antitrust Australian competition laws apply generally (ie, they are not industry-specific). The main statute dealing with competition laws in Australia is the Federal Competition and Consumer Act 2010 (Cth) (CCA). The CCA is aimed at preserving and promoting competition in the marketplace by prohibiting or regulating anti-competitive agreements and conduct including the following.

• Anti-competitive mergers any acquisition of shares or assets likely to substantially lessen competition in a market in Australia (noting that a mandatory filing regime will apply to acquisitions from 1 January 2026). • Cartels competitors making or implementing any arrangement to fix prices, restrict supply, share markets, or rig bids. There are limited exceptions for cartel conduct, most impor - tantly, the joint venture exception (but this is tightly defined) and may be relevant to club lending but these need to be set up carefully to take advantage of the exception. • Resale price maintenance suppliers seeking to ensure that re-sellers maintain specified minimum prices when advertising or selling. • Specific anti-competitive vertical arrange - ments vertical arrangements which have the purpose or likely effect of substantially less - ening competition in a market in Australia. • Market power corporations that have sub - stantial market power engaging in conduct that has the purpose, effect, or likely effect of substantially lessening competition in a relevant market. • Anti-competitive arrangements any arrange - ment, whether between competitors or not, which has the purpose or likely effect of sub - stantially lessening competition in a market in Australia. The financial services sector is a focus of the ACCC generally. In addition, joint financing arrangements may be the subject of ACCC investigation as a cartel and/or anti-competitive agreement. Such investigation may be run as a criminal and civil action.

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

3. Structuring and Documentation 3.1 Common Structures Common structures adopted within the Austral - ian private credit market include the following. • Senior loans a general shift in the market has seen TLB and “unitranche” facilities becom - ing prevalent. TLBs are syndicated loans containing longer repayment terms (five- to seven-year maturity), minimal amortisation, and flexible covenant terms (“cov-loose” or “cov-lite”). In contrast, unitranche facilities blend senior and subordinated debt into a single facility and comprise a consolidated interest rate. Unitranche facilities are provided on a secured term loan basis, generally have limited or no amortisation, and, where addi- tional funding for working capital purposes is required, supplemented by “super senior” revolving credit facilities offered by local banks. We are not currently seeing private credit lenders provide revolving credit facili - ties. • Mezzanine financing as set out further in 3.7 Junior and Hybrid Capital , where borrowing capacity in respect of senior debt has been exceeded, mezzanine financing in the form of junior/subordinated debt (sitting between senior debt and equity) can be afforded as a means to access capital without hav - ing to significantly dilute equity (despite the potential for equity participation rights). Such financings are subordinated either contractu - ally or structurally to senior debt. • Structured and asset financing private credit is increasing lending into various asset-based financing structures, including real estate financing, receivables financing, and securiti - sations/warehouses.

3.2 Key Documentation The key documentation involved in Austral - ian private credit transactions is similar to that used internationally, albeit tailored to local laws and standard market practices. Examples may include: • a facility agreement, typically based on the Asia Pacific Loan Market Association (APL - MA) standard forms; • where secured, an all-asset “general security agreement” securing all property other than real estate; • a security trust deed where a security trustee holds the security on trust for the benefit of the lender group; • where there is more than one class of debt providers, intercreditor and/or subordination agreements governing the respective rights, obligations, and priority of payment amongst the debt providers; and • legal opinions issued by the financier’s coun - sel covering capacity of the obligors (and enforceability of the finance documents). 3.3 Restrictions on Foreign Direct Lenders There are no licensing or regulatory limitations on providing credit or taking security for loans by non-bank lenders, domestic or foreign, to corporate borrowers. However, as noted in 2.3 Restrictions on Foreign Investments , foreign lenders may be subject to FIRB approval. See, also, 2.1 Licensing and Regulatory Approval and 2.4 Compliance and Reporting Require- ments regarding regulatory requirements gen - erally. 3.4 Use of Proceeds and Acquisition Financings There are no statutory restrictions in Australia on the borrower’s use of proceeds.

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

Unlike for banks, there are no further local prac - tical challenges for private credit providers in respect of take-privates and other acquisition financings. 3.5 Debt Buyback Australia follows APLMA standard on debt buy- backs. Where a debt buy-back is permitted, the borrower/sponsor is typically excluded from vot - ing on its debt position. 3.6 Recent Legal and Commercial Developments With the increased prevalence in the US and Europe of “liability management exercises”, we are seeing various “blockers” included in Aus - tralian documentation to limit the ability of bor - rowers to, for example, take on additional debt, dispose of assets, or delay maturity on existing debts. There have been very few liability man - agement exercises in Australia to date. 3.7 Junior and Hybrid Capital Junior/hybrid capital is increasingly common in Australia. Common structures include the fol - lowing. • “Opco” mezzanine debt debt advanced to the same Opco as the senior debt, which is con - tractually subordinated to senior debt through an intercreditor arrangement. This structure is common in real estate finance, but has become less common in leveraged finance. • “Holdco” mezzanine financing debt advanced to a HoldCo entity, with security often limited to the Holdco’s interest in the Opco. This debt is structurally subordinate to senior debt, usually avoiding the need to negotiate con - tractual subordination arrangements with the senior debt providers. • Convertible notes these provide debt-like features with the option to convert into equity

upon certain trigger events. While this has traditionally been utilised in “growth-stage” businesses, there has been increased traction in recent months amongst both listed and unlisted companies for this sort of financing. Compared to senior secured deals, the struc - turing and documentation is varied, with some differences prevalent in the covenant and repay - ment structures, the rate of interest adopted, and the collateral provided. 3.8 Payment in Kind/Amortisation While payment in kind (PIK) debt is common in Holdco mezzanine structures, the past cou - ple of years has seen an increased number of unitranche financings with PIK-toggle features being offered to borrowers/sponsors. There has been an increased trend towards lim - ited or no amortisation on private credit deals. 3.9 Call Protection Like in other private credit markets, call protec - tions (of varying scope) are included on Aus - tralian deals, with a trend towards borrowers/ sponsors with strong market power limiting the premiums payable, the applicable time peri - ods, and the conditions giving rise to payment through carve-outs and discounts.

4. Tax Considerations 4.1 Withholding Tax

In evaluating private credit opportunities, pro - spective lenders should be cognisant of Aus - tralia’s interest withholding tax (IWT) regime. In certain circumstances, Australia imposes 10% withholding tax on payments of interest as well as amounts in the nature of interest and other

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

specified amounts generally bearing a relation to interest. The most common fact pattern in which IWT can apply involves payments by an Australian resident borrower to a non-resident lender where neither entity is operating through a permanent establishment. Other payments which can fall within scope of the IWT regime include the fol - lowing. • Resident to resident an Australia resident borrower, operating locally, makes an inter - est payment to an Australian resident lender, operating through a foreign permanent estab - lishment. • Non-resident to non-resident a non-resident borrower, borrowing through an Australian permanent establishment, makes an interest payment to a non-resident lender, lending through operations in their local country. • Non-resident to resident a non-resident borrower, borrowing through an Australian permanent establishment, makes an interest payment to a resident lender lending through a foreign permanent establishment. There are also a number of exceptions and miti - gation strategies which can reduce IWT or other - wise protect lenders from the economic burden associated with IWT. The most commonly relied upon means of reducing IWT cost for lenders are one or more of the following. • Public offer exemption under section 128F of the Income Tax Assessment Act 1936 (Cth), this exemption provides complete relief from IWT for qualifying publicly offered debentures and debt interests. Satisfaction of the public offer test generally requires qualifying issuers to publicly offer the debt via one of several

prescribed methods (noting different rules apply to different kinds of debt). • Treaty relief either by a reduced rate or complete exemption, treaty relief is available under some of Australia’s bilateral tax trea - ties. The class of entities that are entitled to treaty relief from IWT is generally limited to financial institutions, but can include certain government entities, monetary institutions, central banks, and pension and superannua - tion funds. If available, relief is usually auto - matic, and it is not strictly necessary to obtain approval from the Australian Taxation Office, although those seeking increased certainty regarding the tax impact of their lending activities should consider the private rulings system. • Tax gross-up clauses if drafted effectively, these clauses can shift the economic burden of IWT onto the borrower by obliging the borrower to pay an additional amount (ie, the gross-up) on account of IWT, which the bor - rower would otherwise be legally required to deduct from a payment. The amount of the gross-up is generally not taken to be subject to IWT. 4.2 Other Taxes, Duties, Charges or Tax Considerations No state or territory in Australia charges ad valo - rem stamp duty on loan and security documents. For completeness, Australian tax implications may arise on the sale of secured property. 4.3 Tax Concerns for Foreign Lenders Generally, the primary concern faced by foreign private credit lenders lending to independent borrowers in the Australian market is the risk of IWT, although this risk is manageable via exemp - tions or mitigation strategies, as noted in 4.1. Withholding Tax .

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AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day

4.4 Tax Incentives The public offer exemption from IWT, in par - ticular, makes Australia a potentially attractive location for private credit lenders, though it is important to ensure the relevant public offer test is satisfied. It would be prudent to supplement this protection with a tax gross-up clause. 4.5 Non-Bank Status For non-bank lenders, it is still possible to qual - ify for IWT relief under certain of Australia’s tax treaties, on the basis that the lender constitutes a financial institution (notwithstanding its non- bank status). Confirming this characterisation applies requires careful legal analysis by advi - sors with a thorough knowledge of Australia’s tax treaty network. The Personal Property Securities Act 2009 (Cth) (PPSA) governs the granting of security over “personal property”, with: a) a general security deed granting security over all assets; or b) a specific security deed granting security over particular assets, typically entered into by the grantors in favour of the secured parties. Notably, the PPSA does not cover interests in real property. Security over real property must comply with the relevant legislative requirements and follow the prescribed real property mortgage form of the jurisdiction in which the real property is located. 5. Guarantees and Security 5.1 Assets and Forms of Security Depending on the transaction, assets available as collateral to private credit lenders can include the following.

• Tangible moveable property security over tangible movable property that is “inventory” under the PPSA is considered a circulating security interest over fluctuating assets (ie, “circulating assets”). Perfection of a security interest over such property occurs via regis - tration of a financing statement on the PPSR with the timeframe being limited as compared to other collateral classes. • Financial instruments (ie, shares) security interests over shares can be perfected by control or registration, with perfection by con - trol being preferable. It is common practice in Australia for both registration of a financing statement on the PPSR and delivery of title documents (ie, share certificates and share transfer forms executed in blank) to take place. • Receivables security over claims and receiva - bles (ie, secured/unsecured loans, trade receivables, or contractual rights) are com - mon, with perfection occurring via registra - tion of a financing statement on the PPSR. Further, an assignment of receivables may, depending on the situation, be a deemed security interest and not require a separate security document for registration. • Real property most land is registered under the Torrens system, with each state and terri - tory operating its own Torrens system. Secu - rity over real property is granted pursuant to a registered real property mortgage, which needs to be registered on the Torrens system by recording the particulars in the relevant land titles register. Registration of a financing statement on the PPSR is the most common form of perfec - tion and is made where there are reasonable grounds to believe that the secured party is or will become a secured party over the collateral. Usually, registration must occur within 20 busi -

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