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.

MaxCap and Metrics to deliver $210million debt facility for Resimax development

MELBOURNE, AUSTRALIA – 30 January 2020 – Leading Australian and New Zealand Commercial Real Estate (CRE) investment manager MaxCap Group (MaxCap) and non-bank corporate and property lender Metrics Credit Partners (Metrics) are funding of one of the most significant senior debt facilities for the property sector in recent times.

MaxCap and Metrics have partnered to deliver $210million of senior debt for the acquisition and development of the landmark Eynesbury estate by Resimax Group.

Located 35km west of the Melbourne CBD between Wyndham and Melton (two of Victoria’s fastest growing growth corridors), the estate consists of 825 Ha of land with potential for up to 10,000 home lots and a forecast gross realisable value in excess of $2 billion.

Brae Sokolski, MaxCap’s co-founder and Chief Investment officer said MaxCap was attracted to the investment because of Resimax’s market-leading capability and the potential to unlock value in the asset.

“The market fundamentals for land subdivision are strong, and we remain committed to supporting this sector in fast growing regions such as the Western Growth Corridor in Melbourne,” he said. The Resimax Group is a vertically integrated, privately owned property group.

It is MaxCap’s and Metrics’ first joint credit facility and demonstrates how large-scale non-bank lenders can work together to assist institutional scale borrowers.

Commenting on the venture, Metrics Managing Partner Andrew Lockhart said: “We were very pleased to have worked together with MaxCap on one of the larger non-bank senior debt deals in Australia of the past year.”

“The market is increasingly seeing non-bank lenders undertake larger transactions, closing the gap left by the big banks.”

Speaking about the funding, Resimax founder Aziz Kheir (“Ozzie”) said: “We appreciate the focused and professional support of the entire MaxCap team in arranging this large and complex facility. We feel confident knowing we have MaxCap as a long-term investment partner as we move forward with development of this suburb.”

MaxCap Group Media Release | January 30, 2020

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