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The rising influence of private capital in debt markets is changing the way deals are done. Private capital investors are driving a reinvention of lending products and changing the traditional mix of lenders.

That trend is particularly pronounced in Australia because of the traditional dominance the banks have had in our lending market. Historically, bank lending teams would be siloed, with each silo handling different types of transactions. So you'd have, for example, a dedicated corporate finance team which would offer standard corporate finance terms. The terms of your loan would be dictated by the corporate finance team at that bank, informed by best practice in corporate finance teams at major banks around the country.

The entry of large international private capital investors into the market means we now have more sophisticated borrowers with centralised treasury functions and a book of experience working across multiple lending products, jurisdictions and credit providers. Their expectations of how loans are structured have changed.

A private equity fund, for example, might prefer terms found in the leveraged finance market for what is otherwise a corporate loan for one of their portfolio companies, or, in an acquisition scenario, seek terms provided to them in other jurisdictions. They may use a securitisation product for an acquisition, or a US product such as a term loan B instead of a standard domestic acquisition facility.

The shoots of this trend emerged in the early- to mid-2010s, when we saw traditional acquisition finance and project finance concepts blend with the privatisation of infrastructure assets, as well as the entrance of some of the large international sponsors, who brought their own relationships and preferred US Term Loan B products.

The traditional model of going to the same market every couple of years to refinance with the same product and same lenders is behind us.

We're now seeing the next stage of evolution with the use of products. Blending of terms is one of the defining features of this market, along with the continued use of international products. We're also seeing a wider view on market segments, for example in the emergence of traditional venture capital-style concepts to support activity in the energy transition.

This has been accelerated by the increasing prevalence and prominence of non-bank lenders looking to Australia to deploy capital. We've been talking about the 'imminent' rise of non-bank lending since the early 2010s, and while it's definitely grown, it hasn't yet tipped the scales to the level seen in other markets, where private debt is a staple. That may change as economic conditions increase banks' base rates and private debt can compete more readily on price, because they have always had the ability to compete on terms, speed and flexibility.

Ultimately, the influence of private debt and its role in the make-up of local debt markets will depend on borrowers. As the buyers of these products their mentality of either 'price is king' (which may favour traditional lenders) or 'horses for courses' (which may favour more flexible products offered by private credit) is going to be a key determining factor.

Where I think we will see this play out most publicly is in the energy transition. There have been billions raised by private capital to invest in the transition and there are trillions needed to achieve the transition. As yet, we're not seeing the source and the use meeting each other efficiently.

One of the other trends we're likely to see is the adoption of debt as another tool in the kit for private capital investors - in particular super funds - to deploy funds to businesses building out the energy transition. An investment strategy that blends equity and debt will allow investors to support the energy transition with a more balanced risk return that better aligns with investor and member requirements.

As the world gets smaller, private investors get bigger, super funds accumulate more contributions, and debt terms continue to converge around the world, it's an exciting time to be a lawyer in this field. The traditional model of going to the same market every couple of years to refinance with the same product and same lenders is behind us.

At Allens, we sit across an unmatched volume of deals across all banking products. It's very rewarding to be able to bring the breadth of that experience and understanding to both borrower and lender clients as the market becomes more flexible and creative in its approach to debt.