By Taline Chater, Partner, Restructuring & Insolvency and Financial Disputes, John Moutsopoulos, Partner, Financial Services and Robert Murphy, Special Counsel, Banking and Finance

1. Introduction - Market Overview

The market for private credit in Australia grew significantly to an estimated $A200billion sector at the end of 2025.¹ Relevantly, the Australian Securities and Investments Commission (ASIC) also estimates that the Australian private credit market is comprised of 40-60% real estate lending, 10-30% asset backed securities and 20-40% corporate/commercial lending. Whilst this data shows that private credit lending to the corporate sector is relatively modest as compared to the Australian banks, it has in 2025 and continues to be, a key player in the Australian debt and corporate restructuring landscape.

The key themes which played out in the Australian private credit market in 2025 include ASIC’s increased scrutiny of the sector (including both wholesale and retail private credit investment funds and retail investment platforms), credit risk becoming a key focus of private credit managers and external trustees, a number of key corporate collapses involving (unsurprisingly) significant real estate assets to which investors in private credit funds and retail investment platforms had significant loss exposures, and the adoption of liability management exercises.

Whilst the corporate collapses could be viewed as idiosyncratic, a similar theme has played out in the United States in respect of First Brands Group and Tricolor Holdings collapses to which several large private credit funds were exposed. In that context, Jamie Dimon of JP Morgan (who was exposed to Tricolor) has said “My Antenna goes up when things like that happen… “ I probably shouldn’t say this, but when you see one cockroach, there are probably more. Everyone should be forewarned on this one”. A similar level of caution should be applied in Australia.

Our key insights in respect of these themes and 2026 outlook are set out below.

2. Heighted Credit Risk and Portfolio Resilience

With sustained sticky inflation in Australia, refinancing pressures increased in 2025 and as a result, managing credit risk became a key focus of private credit managers and trustees. Based on anecdotal evidence from our clients, these risks seem contained and at 'normal' portfolio risk levels. Certainly ASIC in its surveillance report has noted that of the wholesale and retail funds it investigated, levels of default were low and between zero to 6 percent.² That said, there have been a few high profile borrower collapses and receiverships in Australia which involved private credit lenders or to which they were exposed. We highlight two examples, the first of which may be considered an outlier (allegations of serious governance failures and weak risk management practices), and the second, an example of debt exposures not limited to private credit funds but also banks and institutional lenders. However, they contain instructive and cautionary tales for private credit lenders in Australia managing the credit risk in their portfolios.³

Adgemis Public Hospitality Group – Australia

The collapse of Jon Adgemis’s Public Hospitality Group in 2025 stands out as one of the most high profile hospitality failures and with significant exposures to private credit funds and institutional lenders. At the time of the collapse PHG’s group level debts were estimated at $A500 million, with Adgemis’s personal guarantees in the amount of $A1.8 billion.

Based on media reports, some lenders relied on infrequent “as if complete” valuations rather than present cash flow values, complex borrower loan structures, and opaque fee structures which created a misalignment of incentives between lenders, managers and investors.

It has further been reported that a $A400m refinancing deal in mid 2024, with an existing lender group provided interim cash flow relief but was ultimately unable to address the underlying operational and governance issues within the group. This led to lenders stepping in and several receiverships, voluntary administrations and liquidations of the PHG portfolio.

The liquidators and bankruptcy trustees have reported that they are presently investigating alleged voidable asset transfers, misuse of company funds and the disappearance of approximately $A1.29billion in declared assets.

Healthscope

Healthscope, Australia’s second largest hospital group experienced a spectacular period of sustained distress in 2024-2025, which was equally much publicised. Its original 20 plus lender syndicate reported to be owed a total $A1.6m, included a mixture of institutional banks and large private credit funds. The majority of its lenders, according to reports agreed to various covenant relaxations and selling restrictions in 2024-2025 to permit the group to explore sale options, to maximise value and restructure its debt. In mid 2025 however, its original lenders withdrew their support and some commenced trading their debt positions and various below par price points, reshaping the group’s debt stack and stakeholder profile to include special situations funds. The group then appointed voluntary administrators and the lender group appointed receivers, the latter of which took control of the sale process.

Various novel restructuring options were reported to have been explored by the group, including pressing for government support and a not-for-profit status to preserve the group’s business, and various sale options considered, including opportunistic debt to equity proposals by newer entrants in the debt stack. Ultimately however, the receivership sale process has progressed, including reports of sales of certain key hospitals back to the NSW Government and in late December and early January of sales to Ramsay Health Care (pending ACCC approval) and Cavalry. As at the time of writing, the receivers’ sale process continues.

3. Liability Management Exercises

There were a few notable instances of liability management exercises (LME) undertaken by corporate borrowers and sponsors in Australia, although in no way close to the complexities and dramatic plays observed in the more developed US and European markets. LMEs involve a spectrum of mechanisms (typically out of court) used by stressed and distressed companies to extend their runway and/or reduce their debt burdens.

Historically, LMEs have fallen into two buckets: consensual and non-consensual:

Consensual mechanisms involve amend-and-extend transactions, debt for equity swaps, repurchases, equitisations, and asset sales. These are the nature of the LMEs observed in Australia to date.

Non-consensual transactions have arisen from covenant light and/or flexible loan documents which have enabled sponsors and borrowers to pursue aggressive structures such as (a) “drop down” transactions, “uptiers” and “double dips”, often triggering disputes between creditors within the capital stack (creditor on creditor violence) and resulting litigation and resetting of market standards in respect of the triggering loan covenants.

Notable, consensual LME transactions in the Australian market included:

The Star Entertainment Group (SX: SGR)

By early 2025, The Star Entertainment Group Limited (Star) entered a trading halt and ASX suspension, publicly acknowledged material liquidity pressures and going-concern uncertainty and that it was actively seeking “liquidity solutions” rather than a formal external administration process.

Between February and late 2025, Star announced various proposals made by large private credit funds to support Star’s full liquidity needs. It is understood by reports (and as expected) that such proposals included conditions such as consents from NSW and Qld governments, regulators and existing lenders settling/refinancing on acceptable terms and various priority and enforcement rights, which in several key instances were ultimately not met by Star. However in March 2025, Star announced that it secured additional interim funding by way of a senior secured $A250m bridge loan and its August FY25 results state that it accessed liquidity from several sources, $A100m from its senior lenders, a $A300m strategic investment from NYSE listed Bally’s Corporation and Investment Holdings Pty Ltd (Star’s major shareholder) and asset sales including (a) the Star Sydney Event Centre for $A60m and the Treasury Brisbane Casino Building for $A60m.

The Star is a good example of where security packages, creditor control rights and approvals may become the gating items in a LME as opposed to pricing.

Coronado Global Resources (ASX: CRN)

Following a suite of financial headwinds since late 2024, the Australian wholly owned subsidiary of the dual listed US Coronado Global Resources Inc announced various lender waivers with its existing private credit lender, providing temporary relief for it to continue finalising/executing effectively a LME in Australia which included a refinance of its asset backed lending facility to its major supplier, a Queensland government owned energy utility, with flexible covenant thresholds to accommodate ongoing market volatility, and amendments to their long term coal supply agreements.

4. Strategic loan to own strategies

We have also continued to see investment management funds manage distressed scenarios pursuant to some type of LME followed by either a solvent equitisation strategy or by utilising formal restructuring processes (receivership and by way of credit bid or voluntary administration) in order to ultimately take ownership of a borrower group. Mills Oakley acted as Australian restructuring counsel for the US investment fund and lender in the landmark cross border restructure of the formerly ASX listed Jervois Group. This followed a significant period of liability management by the group with the support of its lender, and exhausting solvent restructuring options, the lender converted a significant part of its secured debt ($US160m) for full ownership of the group via an interconditional US Chapter 11 and Australian voluntary administration/deed of company arrangement. The lender also provided critical post restructure funding to support the group’s go forward overseas mining activities.

At a smaller scale, in late 2024 we saw the private credit lender of the Salt and Lime group effect a debt for equity swap of its $A42.5m debt through voluntary administration/deed of company arrangement and receivership processes. Mills Oakley acted for the voluntary administrators/deed administrators on this transaction.

5. Regulatory scrutiny intensifies

ASIC certainly increased its surveillance and enforcement activities in the private credit space - particularly in respect of funds targeting wholesale and retail investors and retail investment platforms. ASIC published its first review of Private Credit in Australia (REP 814) in September 2025 and its further surveillance report in November 2025 in which it highlighted key risk areas in governance, fee structures and transparency, valuation discipline, transparent reporting to investors and sector concentrations (particularly in real estate development lending).4

There has been extensive market commentary in respect of these risks by industry leaders. Based on anecdotal evidence and our client mandates across the sector, there will be risk management measures which medium to larger end trustees and managers either already have in place or can improve on at the margins. However, the smaller trustee and managers and ‘start ups’ funds as we understand it, may not have the funds and/or full cycle experience and discipline to do so. As a result, we expect that some of the risk factors identified by ASIC to materialise in 2026 and beyond, at least at the less mature end of the market.

In 2025, we saw ASIC commence proceedings and or issue interim stop orders in respect of a handful of private credit funds following its surveillance activities. We expect this to continue in 2026 as well as industry consolidation in the next 2- 3 years.5

6. Practical considerations for Private Credit Lenders

Base on the above developments, and mandates we have advised on in the last 12 months, some key take aways for players in the mid-market private credit space to consider are as follows:

1. Consistent documentation: We have observed some private credit funds utilising inconsistent finance documentation, particularly when they use multiple law This makes it challenging for private credit lenders to (a) efficiently ensure they are complying with any relevant legislation, such as the new unfair contracts terms legislation, and (b) from a commercial perspective to on-sell the loans into a securitisation or similar structure at a later date. It is therefore worthwhile ensuring that there is consistent financial documentation in place from the time at which the fund is established.
2. Properly documenting amendments and extensions: Given the uptick in consensual LMEs in Australia, it is important that where an agreement is reached with a borrower to extend or amend a loan, the arrangements are a properly documented by way of amended/restated facility documentation or a forbearance deed which all borrowers and guarantors have signed. We have observed instances where consensual mechanisms are agreed commercially but not properly documented as intended. For example, we have seen this in situations where the borrower arranges an impending refinance (and the financier forgoes documenting an extension) and then the refinance subsequently does not occur. As a result, and to state the obvious, makes it difficult for the lender to enforce in a breach situation.
3. Consider enforcement costs when considering how to exit a distressed loan: In the private credit market there are often no allocated funds to pursue enforcement action as there is in the banks. We have noticed this particularly where interest, fees and sometimes charges are all capitalised. As a result, the private credit fund will only ever recover its enforcement costs if the borrower pays back the loan upon its expiry. During the life of the loan, investors in the fund will often have no appetite to advance further funds for enforcement related action. This in turn limits the ability for the fund manager or trustee to take a non-consensual approach (or threaten it) with respect to the distressed loan unless it has access to parent company funds or a separate line of It is however important to get restructuring legal counsel involved early in a distressed scenario so that the full suite of legal and commercial options and costs may be weighed up against a reactionary and limited response to a borrower in distress.
4. Uplifting of existing processes and disclosures to investors in alignment with ASIC’s recent guidance on better practices: Consistent with our advice, most of our fund manager and trustee clients are benchmarking and uplifting processes and investor disclosures for new products. It is really an ‘own goal’ not to do so.

7. Concluding Remarks

Given increased global uncertainty particularly in respect of tariffs, geopolitical risks and sticky inflation (and potential rate rises) in Australia, as well as ASICs continued regulatory focus on the sector, we expect the above themes to continue in 2026. We would be very pleased to discuss these matters in further detail with you, as to which our contact details follow.

 

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¹ Private Credit Surveillance Report: Retail and Wholesale Surveillance Report 820 dated 5 November 2025 (ASIC Surveillance report) at page 3. See also REP-814- ‘Private Credit in Australia” dated September 2025 (ASIC interim report).

² ASIC Surveillance report at page 42, Ibid.

³ We also note that this theme has also been observed in the US market where the First Brands Group and Tricolor Holdings collapse have raised similar issues. It is beyond the scope of this paper to consider these case studies

⁴ ASIC surveillance report and ASIC Interim report, supra note 1.

⁵ We also note that Australian regulator’s scrutiny of the private credit sector is certainly not an isolated action. The Bank of England announced on 4 December 2025 that it had launched its second system wise stress testing of the private markets ecosystem and its implications for UK’s financial stability.