23 May 2018

State of Play: Restructuring, distressed and debt market

With an evolving market and environment of innovation, the frequency of restructurings being led by foreign investors is increasing, says Timothy Sackar. 

To learn more about the key market trends and latest legal developments in Australia, visit our Australian Market: the state of play page.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.


The restructuring, distressed and debt market in Australia continues to evolve.  We have a competitive debt market that constantly seeks out that next transaction.  We have an environment of innovation with restructuring professionals seeking to push the boundaries of what may be possible within the current legislative framework, and we have changes to that framework with the introduction of Safe Harbour as a defence to insolvent trading and ipso facto reform which seeks to lock in contracts post-insolvency.  It's too early to know whether these changes will have a real impact, but they certainly have been welcomed as a means of alleviating pressure on Australian  boards of directors.  We have a steady flow of US and Asian based capital into Australia and the frequency of restructurings being led by foreign investors is certainly increasing.  Unitranche, Term Loan B, Foreign Governed Bond Indentures, while not commonplace are certainly part of the technology being deployed in Australia.  We've also seen an increased use of schemes of arrangement as an effective restructuring tool. 

So what else can the investor, the distressed debt investor, in the Australian market expect to see at the moment?  Well certainly there's been a slowing in single credit and portfolio trading.  Having said that, we are seeing a number of borrowers continue to really focus in on the assignment and novation provisions within the finance documents as a means of trying to manage the lenders they face off against in a restructuring.  We are seeing a number of sectors in the environment of challenged liquidity.  We've seen a number of foreign trading banks depart our shores over the last few years and for those with boots on the ground there are real opportunities.  We are seeing a flow of insolvency appointments in construction, property, retail.  For the most part they're really just following the global trends and the issues in those sectors.  There continues to be a willingness amongst financiers to support restructurings or non‑insolvency solutions, whether it be through relaxing covenants, rolling terms or a combination of the same.  And finally we have seen a real increase in alternate capital providers providing real, credible, legitimate financing packages to corporate Australia.  Ultimately, if this sector continues to grow, it will be busy but we are seeing a number of these hedge funds alternate providers operating in Australia with certainly less competition than they may face in other parts of the world.