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.

MCP Master Income Trust (ASX:MXT) successfully raises $315m in wholesale placement

Metrics Credit Partners is pleased to announce that Metrics Master Income Trust (ASX: MXT) will resume trading today following the successful completion of a $315 million wholesale placement.

The funds raised will be invested in new lending opportunities to further diversify the Trust’s current portfolio, in line with its investment mandate and target annual return of 3.25% above the Reserve Bank of Australia’s cash rate.

Commenting on the completion of the Placement, Metrics’ Managing Partner, Andrew Lockhart said:

“We are very pleased to have completed this wholesale placement and to have received such strong investor support of MXT.

This is a resounding vote of confidence in the Trust, its almost eight years of demonstrated performance, and its ability to deliver on investment objectives.

The proceeds raised under this placement will allow us to continue providing a valuable source of non-bank finance to Australian companies, ensuring greater portfolio diversification for MXT, and in turn, deliver enhanced outcomes for our investors.

Since inception, the Trust has grown its exposure from 55 directly originated loan assets to now in excess of 300 loan assets. Today the Trust is one of the largest investment platforms providing investors exposure to private credit with ASX secondary market liquidity and paying monthly cash income. The Trust will have a Net Asset Value (NAV) of circa $2.44b post Placement completion.

We again thank investors and will continue to seek to originate transactions that are in line with the Trust’s investment strategy, creating diversified exposure to the Australian corporate loan market”.

The New Units issued under the Placement are expected to rank equally with existing fully paid ordinary units on issue in the Trust with effect from their date of issue, including in respect of entitlement to distributions.

Joint Lead Managers on the offer were Ord Minnett Limited, E&P Capital Pty Ltd, Morgans Financial Limited, Taylor Collison Limited and the National Australia Bank.

For further information on the wholesale placement, please see the ASX announcement here: https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02951899-2A1599130&v=04711220c3a57065317ba4efca4a3459a4e46882

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