Despite the prevailing economic challenges, the private lending sector remains a robust area of focus for McInnes Wilson Lawyers. In the first quarter of 2024, the firm has advised on several private financing transactions totalling over $80 million in drawdown value.
Key Transactions
Some of the key transactions that McInnes Wilson Lawyers has advised on in 2024 include:
- a secured senior and supporting mezzanine finance facility for over $25 million to fund acquisition and construction costs for a 120-lot flat land subdivision development on the Gold Coast;
- a bespoke $10 million equity participation arrangement, under which a private lender agreed to provide funding in exchange for a percentage of sale proceeds on a 200-lot residential subdivision;
- a secured senior facility and supporting preferred equity facility for over $20 million to fund a two-stage industrial subdivision and development in Western Australia;
- a secured senior facility for $7 million to fund acquisition and constructions costs for the development of a new hospital in Central Queensland; and
- a secured mezzanine finance facility for $6.7 million to fund construction costs and working capital for the development and sale of 52 residential apartments on the Gold Coast.
Key Trends
Despite inflationary fears, the private debt market continues to gather momentum.
Based on our experience, investors are seeing private debt as a safer and more attractive alternative to other assets such as equities and bonds. With investors looking to obtain better returns and to diversify their risk, private debt continues to be one of the major beneficiaries.
Furthermore, because private debt facilities are often made available on the basis of a floating interest rate (linked to the RBA cash rate) the asset class is well protected against rising interest rates and inflationary risk.
On the borrower side, given the significant increase in interest rates, we have found that borrowers are pushing private financiers to consider alternative fee and interest structures. In particular, our firm has seen a large uptick in equity participation arrangements on development projects, under which a financier’s returns is based on a proportion of sale proceeds.
Given that an immediate downshift in the cash rate is unlikely, in our view, equity participation arrangements will remain a popular debt structure for developers in the foreseeable future.
About the Team
The McInnes Wilson finance practice is renowned for providing a commercial approach across all areas of private debt.
The firm advises a variety of participants in project financing transactions, including senior and mezzanine debt financiers, capital market arrangers, borrowers, sponsors and other equity participants.
For more information about McInnes Wilson Lawyers’ finance practice, please contact Taryn Hartley or Nick Camphin.
Senior Associate
Principal