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 launches Metrics Business Finance

Leading non-bank corporate lender Metrics Credit Partners (Metrics) has launched Metrics Business Finance to accelerate its move into lending for small and medium enterprises (SME) and small commercial property projects.

To support growth of its SME lending, Metrics has acquired Bigstone Finance, which brings deep experience and valuable relationships in this dynamic sector of the Australian economy.

Metrics Managing Partner Andrew Lockhart said the addition of the Bigstone team to the funding capability of Metrics would create the scale and focus for Metrics Business Finance to become a significant competitor in the SME and commercial property markets.

“Establishing Metrics Business Finance is a natural extension of Metrics’ existing skills and experience in non-bank lending to Australian business,” Mr Lockhart said.

“We believe that there is an exciting opportunity for Metrics in this market and that Metrics Business Finance can make a meaningful contribution to the task of funding SMEs and commercial property in Australia.”

Metrics was established in 2011 and manages a suite of ASX listed and unlisted funds with $10 billion assets under management and providing in excess of $15 billion in private credit to large corporates and other businesses in Australia and New Zealand.

12 November 2021

‍

Email us
invest@metrics.com.au

1300 010 311
Mon-Fri 9:00 - 5:30