Outside of the more traditional bank and bond markets there are a broad range of Alternate Capital sources available for businesses to fund growth and investment.
In this report, KPMG Deal Advisory spotlights three of these sources:
Private Debt
Broad range of private debt participants
Global asset managers, local credit funds and superannuation funds are all looking to capitalise on a range of opportunities in private debt.
Flexibility in structures
Options for borrowers include senior and mezzanine debt, and in more recent years, unitranche structures. Asset based lending (ABL) is also becoming more prevalent in Australia.
Growing ESG focus
ESG is playing an increasing role in investment decisions by private debt investors indicating a fundamental shift in attitudes.
There has been significant growth and activity over recent years in the Australian private debt market. Deal volume tracked by Prequin with an element of private debt increased from $0.9bn in 2017 to $9.6bn in 2021.
Government Agencies
Growing financial support
Increased funding is being primarily driven by policy objectives to support Australian job creation, public benefit, emission reductions and global trade.
Diversity of options
The presence of several agencies with varying mandates provides borrowers a breadth of funding options that are often complementary to bank debt and private debt funding.
Australian government agencies serve as a key alternative financing option, particularly for new investment into the energy and resources sectors.
Structured Finance
Private funding sources are growing
A key source of capital for emerging nonbank lenders is private credit. Private securitisation warehouses are often led by domestic and global banks, with private credit and alternative asset managers holding the mezzanine tranches.
Securitisation market tailwinds
Once nonbank lenders reach scale, the preferred option for funding is public securitisation issuance. Recent years have seen an unprecedented volume of public securisation issuance by nonbank lenders, along with continued credit spread compression.
Government support measures
The Australian Office of Financial Management (AOFM) provided structured finance market access support at the onset of the pandemic and continues to support development of greater competition in the SME lending market.
Although Australian banks remain the primary source of lending for small and medium enterprises (SMEs), more flexible and competitive options beyond traditional property-secured loans are becoming available from nonbank lenders and challenger banks.
How KPMG can help
Our KPMG team has real time knowledge of the more traditional debt capital markets and the growing range of alternate capital sources. We advise on a wide range of transactions involving both debt and equity, including raising financing for acquisitions, buyouts, dividend recapitalisations, growth capital, special situations, debtor-in-possession and exit financing in bankruptcies.
We maintain close relationships with debt, mezzanine and equity capital providers including banks, specialty finance companies, insurance companies, superannuation funds, local and global alternative asset managers, family offices, credit and equity funds and other private investors. As a value-added adviser, we provide objective advice, experienced deal teams, a fully integrated service offering and the benefit of the KPMG global advisory network.
