悉尼开发商破产暴露澳洲私募信贷风险

[music] Why has one Sydney property developer [music] got investors so worried?

Sydney's housing crisis just got worse with a major developer falling into administration owing billions of dollars with angry buyers in limbo.

Administrators of a major Sydney developer have warned it could collapse [music] completely before the week is out.

There's no cash here. Uh we don't have any cash to pay wages. We don't have any cash to pay suppliers.

Welcome to the Bloomberg Australia podcast. I'm Chris Burke coming to you from [music] Melbourne. A crisis at a major Sydney property developer has put the spotlight on a fast growing but little understood corner of Australian finance called private credit. And even if you've never heard of it, there's a good chance some of your retirement savings are invested in it. This week, finance reporter Richard Henderson joins me to look behind the headlines, explain what private credit actually is, and whether Australian investors should be worried.

Rich, welcome back to the podcast.

Thank you very much.

So, you have been reporting over the last week on this uh Sydney property developer called Bethl, which recently fell into insolveny. Construction firms have been collapsing across Australia in big numbers for some time now. So why are the troubles surrounding this developer attracting so much interest?

I [snorts] think it's because the size of the loans. we have uh around $3.3 billion Australian dollars owing uh from Baffla and um you know that's a that's a pretty significant number uh when you consider the you know the overall market for private credit in Australia uh last year was estimated by ASICH to be 200 billion uh with about half of that in in property. So, you know, this is a pretty significant uh headline number and I think that has [clears throat] a lot of folks worried that there might be others out there and that this could bubble up to the surface to be quite a quite a big problem.

And let's just let's just talk about private credit. Um, it's a very kind of corporate sounding name that that almost sounds like an exclusive club, but it actually covers a huge lay a huge range of lending, right? tell us more about the industry and why it's grown into this this $200 billion industry you just mentioned.

Yeah, and it could be much bigger than that. Um by now that um that estimate is almost uh a year old uh from ASICH the the regulator. So private credit essentially it's just lending uh but instead of it coming from a bank, it's coming from uh you know private investors whether that's a a pension, a foundation, endowment, a wealthy family. Uh and so in Australia it's become quite tied up in real estate that's quite unique.

Uh but at its heart this is just lending basically. Uh in the US and in Europe the um you know these types of loans have exploded in popularity. the market has ballooned since the financial crisis because banks uh basically came under a whole lot of pressure and new regulation after the financial crisis especially in the US and so private credit non-bank lending shadow banking these are all uh you know the same thing that ballooned after uh after the financial crisis in Australia it's a it's a been a smaller um obviously a smaller market and that growth has been um a little slower but recently it's really taken off.

Yeah. So, Baffler, uh, that's a big it's a big developer in Western Sydney, right? Um, it's a also a good example of something that makes, as you said, Australia's private credit a bit different from the rest of the world. Uh, that that big exposure to to property. Do you know why uh that's happened here? Why why we are why private lenders here love property so much? I think it's been tightly linked to the big banks stepping back from the market and focusing um a bit more on you know sort of owner occupier um sort of mortgages rather than these um these loans which are directed towards property developers.

Uh some of them can probably be you know more speculative we could say. Um, and another thing you absolutely have to keep in mind with private credit, investors love it because it is floating rate. What does that mean? It means it's um you the amount of interest you would be paying on a loan is always above the current uh interest rates, right, set by the central bank. And so in a rising rate environment, the actual nominal amount that you would get in yield will be quite a bit um you know could be quite significant.

So these can be wonderful investments but because that's quite a lot of yield that you're earning that means whoever is paying that the uh the borrower they're going to be under potentially a bit more stress as those interest rates go up as we've seen. uh that floating rate nature of the debt means that you're going to be paying a little bit extra uh when rates rise.

Yeah, good point. Um is this also uh a symptom of the wider malaise in the housing sector? I mean, we had that data from totality this week showing Sydney prices are now down about 7% from their peak in February. Uh thanks to those those three interest rates you mentioned. Um also the the changes to tax breaks in the May budget.

Exactly. This is all intertwined and it's a it's a really important moment for the Australian property market. You know, we haven't really seen many instances, especially this quick uh of um prices coming down so quickly and you know, they they've had such a great run since the pandemic. Uh but this is a really significant pullback. Partly it's cyclical. That's to say it's linked to, as you say, the the increase in interest rates.

And keep in mind, we still have fully priced in one more at least one more interest rate hike, right? Financial markets are telling us, traders are telling us they expect the RBA to hike again, right? So that means more stress uh especially for these private credit guys um those who have borrowed from the private credit market, right? So, uh, you're absolutely right and let's just unpack very briefly that May budget that's peeled back some of those sweeteners, uh, negative gearing specifically for property investors.

They want first home buyers to get a better deal. The government, right, that was their big driver. So, let's remove negative gearing for property. Well, guess what? That's taken investors out of the market. That's a huge, huge chunk of the market. people often say around 40% of residential um home buyers or investors. Well, guess what? That group now is is questioning whether they should partake in some of these um you know purchases and everyone's really just trying to figure out what is going on with the property market.

And so bring it back to Ba Baffler, they're basically seeing and they've told us this a slowdown in sales. So they they might have actually gotten through this period, but it's this slowdown in sales that's basically had less money coming into the company to keep operating. That's really a key feature of what's going on here.

And all those factors you mentioned obviously mean greater scrutiny on the sector. Um Sarah Court, she's the chair of Australian the Australian Securities and Investment Commission ASICH. Uh she was speaking at an event last week and made a very interesting observation. Uh she said we're seeing the first significant cracks in Australia's private credit industry. You know, private credit is not a new thing. They've been uh they've been monitoring the sector for uh quite some time.

Why is uh why is asset kind of turning up the heat a bit on the sector? what's what's their main concerns now?

ASICH are really zeroing in on private credit and they're doing a lot of work behind the scenes. Uh you know, partly they're worried about retail investors. They're worried that um you know, folks who are investing in private credit funds for instance might not fully understand the risks and again those risks as we're seeing play out can be heavily tied towards real e