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.

No 21 Broadbeach Blvd | Development Spotlight

Project spotlight: No 21 Broadbeach Blvd

Delivered in partnership with Glenvill and QNY™, this ultra-premium beachfront development will bring 16 full-floor residences with 270-degree beachfront views of the Gold Coast.

The development will feature resort-grade amenities such as a glass-edged ocean-view pool, spa, saunas, gym, yoga and Pilates areas plus outdoor BBQ and dining spaces. All within close proximity to key retail and lifestyle precincts Pacific Fair Shopping Centre, Gold Coast’s premier retail centre and Star Casino.

Construction is underway, targeting completion by year end.

Issued by Metrics Credit Partners Pty Ltd ABN 27 150 646 996 AFSL 416 146. This content is provided for informational purposes only and not intended to constitute financial advice or an offer or solicitation to invest in a financial product. It has been prepared without taking into account a particular person’s objectives, financial situation or needs.

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