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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