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.

Metrics involved in A$1 billion debt refinancing for Patrick Terminals

March 2019 – Patrick, one of the largest providers of container stevedoring services in Australia, has successfully refinanced its A$1 billion syndicated loan facility, with Metrics chosen as one of the mandated lenders.

Patrick had been looking to refinance a syndicated loan facility put in place at the time of its acquisition by Qube Holdings and Brookfield Infrastructure. Patrick was previously part of ASX-listed freight logistics company Asciano Limited which was privatised in 2016.

Metrics was an existing lender in Patrick’s prior syndicated loan facility. The refinance was conducted as a competitive bidding process with Patrick seeking a mix of 3 and 5 year, revolving and term financing. Patrick used this opportunity to capitalise on its continued solid business performance since going private.

Metrics is one of Australia’s leading non-bank corporate lenders and was proactively involved with the borrower and its advisers during the refinancing process.

Sydney-based Metrics increased its commitment in the new facility with financial close achieved in March 2019.

Patrick held about 45 percent share of the Australian national container market, as at 31 December 2018. The company will benefit from a NSW Ports investment in rail infrastructure at Patrick’s Port Botany container terminal announced last year, that will enhance productivity and efficiency in container movements at the port.

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