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For the past few years, everyone has been talking optimistically about the growth of private credit in Australia. In 2024, private credit issuance dominated large cap deals in the Australian leveraged loan market.

For the first time this year, there are numerous large cap deals we can point to—such as Novotech's recapitalisation, the take-private of APM, KKR's acquisition of Perpetual Limited and the acquisition of Waste Services Group. Private credit has been used as a preferred financing tool for each of these bigger deals, given sponsors' desire for higher leverage without distribution risk.

We've seen new entrants into the market this year, as well as announcements from some of the bigger players of new APAC-dedicated private credit funds. There's more liquidity in the asset class, but also more demand for global players to deploy private credit in Australia. The degrees of relativity between our market and the US or Europe are shrinking.

We're now seeing clients more willing to tailor their documentation structures according to the investment thesis.

Among borrowers, we're seeing greater understanding of the investment thesis and focus of private credit funds as distinct from traditional financiers. Private credit funds want to lend money, but their focus is on keeping it with the borrower and generating return on that deployed capital. For traditional financiers—such as commercial banks—the focus remains on deleveraging and freeing up balance sheet allocation to pursue other financing opportunities.

Until recently, much of the market didn’t distinguish between those different investment theses, so documentation and structuring was largely consistent between the two. The terms between a traditional leveraged loan and a private credit or direct lending loan were blurred. We're now seeing clients more willing to tailor their documentation structures according to the investment thesis, rather than relying on how things have historically been done for traditional loans. 

We're fortunate at Allens to have in-depth experience with both private credit funds and traditional banks, which allows us to advise our clients on the pros, cons and structuring options of each financing source.

The depth of deals executed in the market this year demonstrates to prospective borrowers the structures that are available and how credit funds are willing to participate. There's a lot more awareness in the market of how and when private credit can be used. It will only grow from here.