Private credit hit is drama waiting for crisis

Brookfield

16/09/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Antony Currie
MELBOURNE, Sept 16 (Reuters Breakingviews) - Nuno Matos is at least half right about the latest private credit shock. The former HSBC executive who now runs one of Australia's big four banks, ANZ ANZ.AX, on Tuesday said that the collapse of Bathla, one of the country's largest affordable-housing developers, is a normal part of business, despite the noise it is generating in the "very risk-averse" country. He says he's not "concerned at all for the banking system" or his own firm. That's a safe assessment, so long as Bathla's plight remains a one-off.
It helps that more than 40 non-bank lenders – including Brookfield-owned BN.TO La Trobe Financial and Asia-focused investment fund PAG – account for some 90% of the bankrupt builder's A$3.4 billion ($2.4 billion) of debt.  
On the face of it, Bathla seems a unique case. Its troubles came to light last year, before the housing market downturn. Andrew Griffin, CEO of private lender Balmain, which had lent some A$120 million, told his investors that Bathla's demise stemmed from "meagre management resources" stretched across "too many jobs". Another investor who declined to lend any money said the company grew too quickly and was too willing to pay a premium for land, the AFR reported.
Those ought to be clear warning signs to add to the already boom-bust nature of property developers. Australia's traditional banks have heeded them, though they have taken their caution to an extreme, doing little to no business with them. But a hunger for yield has a history of tempting plenty of lenders and investors into the sin of poor risk management.
One of the early signs of the 1998 financial crisis, for instance, was Thai developer Somprasong Land defaulting on a bond. The trickle of subprime lender bankruptcies in 2006 highlighted the mass abandonment of core lending principles that soon developed into a global financial crisis.
Australia's overall financial system looks secure: its banks are well capitalised and hold mortgages with loan-to-value ratios in the 70% range or lower. Though the country's opaque private credit market is harder to assess, the Australian Securities and Investments Commission last year guessed that it accounted for some A$200 billion of loans. And it reckoned 40%-60% of that went to property, predominantly in the developer sector that banks shun. 
Falling house prices, coupled with rising supply costs, are likely to expose more builders to pain. Sure, private creditors often lend with land and property as security, so ought to be relatively protected if only a handful of firms collapse. But if more fail and the drama turns into a crisis, even Matos' ANZ is likely to feel the broader ill effects on the economy.
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CONTEXT NEWS 
ANZ CEO Nuno Matos on September 15 said that he is “not concerned at all for the banking system" and "certainly not for ANZ” after the collapse last month of property developer Bathla. Speaking at an industry conference, he also said that it's normal for businesses to fail occasionally and that Bathla's woes generated "a lot of noise" in a "very risk-averse" country.
The builder went into administration – the Australian equivalent of bankruptcy – on August 24, owing more than A$3 billion ($2.14 billion) to around 40 different private credit providers.

(Editing by Una Galani; Production by Ujjaini Dutta)
((For previous columns by the author, Reuters customers can click on CURRIE/antony.currie@thomsonreuters.com))