NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
1. Private Credit Overview 1.1 Private Credit Market
Sectors that saw significant private credit activ - ity during 2024 include: • agriculture/horticulture, possibly driven by high interest rates and a flat market for rural property; • asset finance providers, particularly as holdco debt behind senior securitisation structures; • tourism, hospitality and retail/consumer dis - cretionary; and • real estate development; banks remain willing to fund real estate development, but strict pre-sale requirements in a flat housing market have led to a continued focus on private credit funding for developments. 1.2 Interaction With Public Markets There is no established high yield bond market in New Zealand. While there is an active debt capital market for corporate issuers, this is typi - cally reserved for investment grade companies. Accordingly, private credit tends to not compete with New Zealand’s debt capital markets. 1.3 Acquisition Finance M&A activity over the last 12 months has been comparatively limited. The few large-cap deals that transacted drew significant interest from banks. Private credit had greater success on mid-mar - ket transactions. But banks remain competitive in this market, too. Notably, domestic private equity firms tend to use less leverage than their offshore counterparts, making bank financing
New Zealand has been slow to adopt private credit for corporate borrowers compared with more established markets overseas. It has a well-established non-bank real estate property lending market. That said, the private credit market has been growing at a steady pace in recent times on two fronts: • there is strong appetite from offshore private credit funds to lend to New Zealand borrow - ers. These market participants range from smaller, specialised funds to credit strategies sitting with global financial sponsor platforms; and • a number of New Zealand based fund man - agers have raised funds. Private credit funds tend to focus on the lever - aged and sub-investment grade markets. Dur - ing 2024, there were two competing themes in this space, which led to a steady continuation of private credit lending, but without rapid growth: • M&A activity was subdued and, as a result, there were limited acquisition financing opportunities for private credit funds; and • macro-economic conditions led to an increase in distress levels; this caused some borrowers to refinance bank debt with private credit and others to borrow subordinated debt in order to reduce senior debt levels, which presented opportunities for private credit providers.
more accessible. 1.4 Challenges
Offshore funds remain active in exploring oppor - tunities in New Zealand. However, being a small - er market, deal sizes for New Zealand transac -
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