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.

Media Statement in Response to Bloomberg Article

Metrics Credit Partners (“Metrics”) is not aware of any ASIC investigation related to specific practices or transactions in our business.

In line with our peers and industry bodies, Metrics has actively participated in industry responses related to ASIC’s review of private and public markets, and like our peers has responded to requests from ASIC for information to assist its review of private and public markets. We are fully supportive of the role of regulators in ensuring the integrity and proper functioning of Australian financial markets and welcome strong, fit-for-purpose reforms.

Importantly, as a leading alternative asset management firm with ASX listed funds, we operate with robust governance standards – this includes disclosing industry exposures, and detailed performance and portfolio risk settings provided regularly to the ASX. In relation to loan valuations, we use independent and highly experienced professionals to verify the market value and any potential
impairment across our portfolio.

We will continue to engage with the Regulator as it seeks to better understand the workings of private credit markets.

Media Contact

Joel Labi
Joel.Labi@metrics.com.au
0450 582 360

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