Jurisdiction - Australia
Reports and Analysis
Australia – Distressed Investing Market Update.

29 March, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Insolvency & Restructuring

 

The secondary debt market, consisting of distressed, impaired and non-core loan sales, has continued to experience a good level of activity in the past year.

 

Whilst activity might have been down on 2010 and 2011, as shown by the fall in visits to Australia by market participants, it does appear to have exceeded expectations. During certain parts of the year liquidity in the market was impacted by the European debt crisis.


In regard to transactions in the last 12 months, one of the largest was Nine Entertainment, where there was sufficient agreement to allow for a debt for equity swap to occur. A scheme of arrangement was used to implement the loan to own strategy, which given the potential contractual issues was a far more seamless process, compared to a formal insolvency process to restructure the group. Other recent restructurings that were implemented through schemes include Alinta, Redcape and Centro.


In terms of debt trading, BrisConnections was one of the largest groups whose debt has started to trade recently following a period of contractual debt “lock-up”. It is the owner of AirportLinkM7 in Brisbane. The road opened in July with traffic well below forecast. It has $3+ billion of debt originally across 10 banks. Lenders were considering a debt standstill in February 2013, however opted for a formal insolvency process.


Other matters where debt has continued to trade in the last 12 months include Soul, Oracle, Fitness First, RiverCity, Top Ryde and Gunns. However, it does appear that there are less new syndicated names appearing as distressed.


The largest portfolio transaction in late 2012, was the BOSI commercial loan portfolio with what is believed to be approximately AUD$250 million in face value. Prior to this deal, BOSI also sold its distressed property loan portfolios in Australia and New Zealand, estimated at AUD$3.5 billion combined face value, in two separate transactions to consortiums including Blackstone and Morgan Stanley, and to Goldman Sachs and Brookfield Asset Management.

 

Based on the above, debt trading does now appear to be generally accepted by banks operating in Australia.


With respect to profiting in the Australian secondary debt market, the results to date appear to have been quite mixed with some participants having extremely good results and others not so. Similarly the prices that banks have sold the original debt have greatly varied on single transactions, particularly given changes in market liquidity, transaction outcomes and currency over recent years.

 

View the complete guide here.

 

For further information, please contact:

 

James Marshall, Partner, Ashurst

 

 

 

 

 

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