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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