Does a slowing economy increase the risk of loan defaults in private debt?

Well-run private debt funds use rigorous scenario testing and real-time monitoring to mitigate risks. Historical net write-offs by banks peaked at just 0.68% during the GFC and were 0.04% in September 2024, demonstrating strong resilience across economic cycles.

Does a loan default always result in a credit loss?

No. Private debt investors are protected by their seniority in the capital structure. Senior debt holders get repaid first, before subordinated debt, preferred equity, and common shareholders. Covenants and controls act as early warning signals allowing lenders to engage with borrowers to mitigate financial loss.

Are all private debt managers the same?

No. Private debt managers differ significantly in scale, credit skills, and experience. Quality managers need sizable assets under management, bank-level credit skills, extensive networks, and the ability to directly originate and diversify loans across borrowers to achieve optimal outcomes.

Does commercial real estate debt put capital at risk in a property downturn?

Property owners face greater risk than lenders. With typical loan-to-value ratios of 60%, owners' equity acts as a buffer. Even if property values fall significantly, lenders can compel borrowers to restore their position or pursue asset sales to maximize recovery without necessarily incurring losses.

Are non-bank lenders lenders of last resort?

No. Competent private debt managers lend to quality companies and often compete with banks or work alongside them in lending syndicates. Post-GFC regulations requiring banks to hold more capital have created financing gaps that private debt fills for established companies with sound fundamentals.

Investec Australia’s corporate loan book sold to Metrics Credit Partners

Investec in Australia today announced it had reached agreement to sell its local corporate and acquisition finance (CAF) loan portfolio to Metrics Credit Partners.

Investec Australia CEO and Country Head, Milton Samios, said: “We are pleased with this development as it will ensure local corporates continue to be served by a highly regarded local lender.

“It is a high-quality portfolio, which is a testament to the Investec Corporate Advisory and Finance Team (CAF), led by Simon Beissel, which has built this business over the past 10 years.”

The acquisition will cement Metrics Credit Partners as the country’s leading non-bank corporate lender, with a portfolio exceeding $6.5 billion.

Metrics’ Managing Partner, Andrew Lockhart, welcomed the acquisition, saying it would deliver enhanced investment opportunities for Metrics’ clients.

“This is a great outcome for investors because it will add to the diversity and liquidity across our funds and lead to an uplift in expected total returns. The credit quality of this portfolio is sound and provides a great opportunity to expand our relationship with Australian corporate borrowers.”

The portfolio comprises leveraged finance and fund finance loans to corporates and funds across business services, entertainment, retail, childcare, healthcare, mining services and financial services in Australia.

Investec’s Resource Finance and Project and Infrastructure Finance loan portfolios were not included in the sale process, which was run by the CAF team. This team is shortly to be spun out into a separate independent advisory boutique.

Investec, which has been in Australia for more than 23 years, announced at the end of last year that it was exiting the local market as part of its parent Investec Bank plc move to simplifying and clarifying its business structure.

For further coverage on this announcement, see below:

The Australian, 24 March 2021 – Investec sells $1.2bn loan book

Private Debt Investor, 24 March 2021 – Metrics Credit acquires Investec Australia corporate loan portfolio

Financial Standard, 24 March 2021 – Sydney boutique to buy a slice of Investec assets

Fixed Income News Australia, 24 March 2021 – Metrics Credit Partners acquires Investec Loan Book

Reuters, 24 March 2021 – Investec sells Australian $913 mln acquisition finance loan-book to Metrics

Advisor Voice, 25 March 2021 – Investec Australia’s corporate loan book sold to Metrics Credit Partners

Money Management, 25 March 2021 – Investec corporate loan book sold to Metrics

The National Tribune, 30 March 2021 – Allens advises Investec on sale of $1.1bn loan portfolio

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