NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
tions often do not meet the minimum ticket sizes required by many offshore credit funds. Local funds are being established to meet the growing demand for private credit solutions. However, fund raising can be challenging. Local institutional investors appear to be less familiar with private credit as an asset class (compared with offshore investors). As a result, the growth rate of funds being managed by local managers is still gaining momentum. The subdued M&A market has limited oppor - tunities for private capital deployment in recent times. However, general market sentiment appears to anticipate an increase in M&A activ - ity in 2025, which should lead to greater deploy - Private capital providers are active across the credit spectrum, including in providing junior/ hybrid capital products. Common products include: • unitranche loans (predominantly provided by offshore funds on larger cap transactions); • contractually subordinated mezzanine debt; and • structurally subordinated debt; these transac - tions were particularly prevalent in 2024 as a means of reducing senior debt at opco level and equity release. Private credit providers may require equity upside (such as warrants) in addition to typi - cal debt returns (usually for early-stage/venture deals). 1.6 Sponsored/Non-Sponsored Debt Private credit funds are primarily focused on the business, its cash flows and the return profile ment opportunities for private credit. 1.5 Junior and Hybrid Capital
(rather than the particular ownership structure). Funds are active in lending to private equity sponsor vehicles, but also to founder-based businesses. Listed companies tend to have lower leverage and, therefore, access to cheaper bank funding, but we have seen listed compa - nies borrow private capital in special cases (usu - ally in distress scenarios and where an equity raise is not available). 1.7 Recurring Revenue Deals and Late- Stage Lending The New Zealand recurring revenue debt market is growing, and smaller private credit funds (often the credit strategies of PE firms or family offices) are active in this space. However, local banks are also active in supporting pre-profit customers, particularly in the tech space, which can make it difficult for private credit to compete. 1.8 Deal Sizes, Fund Sizes and Fundraising For New Zealand-based funds, deal sizes tend to be in the range of NZD5 million–NZD30 mil - lion, with fund sizes ranging from NZD50 million to NZD300 million. See 1.4 Challenges for fund raising challenges. Offshore funds active in this market may under - take a single lend up to NZD400 million (although the number of deals of that size in this market are limited). 1.9 Impending Regulation and Reform Regulators do not appear to have any particu - lar focus on increasing the regulation on private credit lenders in New Zealand. There are no pending proposals for increased regulation of foreign private credit lenders.
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