2025 largely saw a continuation of prior years’ themes of favourable conditions for Australian borrowers, notably: (i) considerable liquidity from non-bank lenders and increased appetite and flexibility from traditional banks to provide competing products and solutions; (ii) increased variety of debt products and borrower-friendly terms across a range of products, including both non-bank-led and traditional bank transactions; and (iii) continued downward pressure on pricing for Australian debt finance borrowers, in particular private equity sponsor-backed portfolio companies.

Cov-lite terms continued to be the standard for global sponsors and increasingly became available for non-global sponsor-backed financings under private credit-led unitranche financings, while borrowers seeking regionally distributed term loans were also able to capitalise on improved terms (including stretched senior term loans with single financial covenant structures in bank-led transactions) and competitive pricing.

Energy transition and digital infrastructure assets continued to benefit from considerable bank and non-bank lender appetite for debt investments (including sustainability-linked loans), while infrastructure-focused private debt funds also capitalised on the need for leverage and liquidity by offering holdco financings structurally above portfolios of infrastructure and/or energy assets. Other non-bank lenders continued to fill the financing gap in ESG-sensitive sectors where traditional banks remain hesitant to lend.

Notable sponsor-backed transactions included:

• CC Capital’s AUD3.3 billion take-private of Insignia Financial (supported by a New York law-governed, US dollar, syndicated TLB tranche (distributed in US institutional debt markets) and an Australian dollar TLB tranche (distributed in regional APAC debt markets));
• TPG Capital’s take-private of Infomedia and take-private of Lynch Group;
• EQT’s over AUD1 billion refinancing of Icon Group’s Australian dollar TLB;
• Permira’s AUD1.8 billion refinancing of I-MED Radiology (arranged and provided by global investment banks and major Australian commercial banks); and
• KKR’s refinancing of The Arnott’s Group (with a US dollar TLB coupled with an Australian dollar tranche) and of MYOB.

In the infrastructure debt space, energy transition and digital infrastructure assets continued to find broad support and liquidity from banks and non-bank lenders alike. A noteworthy transaction was AirTrunk’s AUD16 billion debt financing with a broad lender consortium providing a multi-currency and multi-tenor debt financing package including sustainability-linked loans.

Australia has a broad and diverse range of debt finance providers that offer a variety of products and solutions for different borrower types and financing needs.

Domestic Banks

Traditional Australian banks are the prevalent providers of corporate investment grade or lower-levered financing across asset classes, both in the loan-to-hold and underwrite-to-distribute institutional debt markets. They are also a prominent source of working capital and liquidity financing solutions, including revolving loan facilities and credit support instruments. Domestic bank solutions offer attractive pricing in exchange for more conservative terms and lender protections.

International Banks

A number of global banks are present and active in the Australian debt finance market competing with the domestic banks on corporate investment grade, leveraged, infrastructure, project and property finance. Global investment banks, meanwhile, are active in transactions requiring access to global institutional or syndicated debt markets due to debt quantum (for example, the US TLB market) and transactions involving non-standard (or higher-leveraged) credits or structures. Global investment banks also increasingly have balance sheet lending capabilities for deployment in Australia as direct lend-to-hold solutions, including as part of a strategy to compete with (or provide financing alongside) private credit funds on unitranche financings as an alternative to an underwrite-to-syndicate strategy.

Non-Bank Lenders

A wide range of non-bank lenders also operate in Australia, pursuing diverse strategies and providing a variety of debt financing solutions. Domestic private credit funds are particularly active in the real estate finance sector and also support middle market and domestic private equity funds on acquisition financing transactions. Global private credit funds, meanwhile, service global private equity sponsors on leveraged acquisition financings and portfolio company refinancings, often competing directly with international banks by offering an alternative to an underwrite-to-distribute solution. As global sponsors increasingly seek to align their Australian debt financing terms with those in North America or Europe, they are turning to global private credit funds with whom they have worldwide relationships and precedents that can drive the adoption of global terms in Australia.

Other non-bank lenders in the Australian debt finance market include superannuation, global pension funds (a particular source of liquidity for Australia’s corporate bond market) and sovereign-backed credit funds, as well as domestic and global special situation funds and hedge funds, which also provide a range of tailored debt products for specific needs such as mezzanine financings, second lien financings, hybrid debt financings (with tandem equity instruments) and holdco financings (including on a pay-in-kind (PIK) basis) as well as asset-backed securities transactions.

Due to its geographical position and robust diversified economy, Australia has been fortunate to be relatively less affected by the geopolitical and trade tensions during 2025, including the ongoing conflicts in Ukraine and the Middle East. As elsewhere, however, the impact of the current war in Iran on global energy markets is expected to result in increased inflation and, correspondingly, increased central bank interest rates. Notwithstanding the uncertainty created by tariff regimes, disruptions in global supply chains and trade patterns, and international armed conflict in 2025, Australian debt finance markets largely continued to benefit from robust liquidity and competition resulting in tightened pricing and looser terms. The bullish cycle in resources, commodities and energy driven in part by geostrategic and supply chain security concerns saw considerable M&A activity in the metals and mining space, supported in many cases by underwritten bridge and other debt financings, such as in respect of Harmony Gold’s acquisition of MAC Copper. Similarly, as ESG concerns took a back seat to energy and materials security, the coal sector also saw considerable interest from private credit as well as a return of global investment banks, in particular for metallurgical coal weighted producers, with a notable example being the USD2.08 billion bridge loan for the proposed (but ultimately withdrawn) acquisition by Peabody of Anglo American’s Australian metallurgical coal assets.

Australia’s flexible, common law legal system and the ease with which security can be taken over assets permits the full spectrum of debt financing structures, from acquisition to corporate, and from real estate to structured finance. Project finance is particularly prevalent, reflecting the significant contribution of infrastructure, energy and resources to the Australian economy. 

Australia’s debt capital markets (DCM) are well-developed, servicing regulatory capital raising by financial institutions, investment grade corporate offerings and structured securitisations (such as residential mortgage-backed and other asset-backed securitisations). One exception, however, is the lack of an Australian high-yield bond market. See 3.1 Debt Finance Transaction Structure.

Loan facility structures in Australia broadly follow market conventions in other developed jurisdictions. Loan facilities can be syndicated, bilateral or by club (whether traditional bank or private credit lenders), with term loans, revolving credit facilities and/or capex and acquisition facilities being the most common structures.

The senior secured term loan, historically amortising but now increasingly bullet maturity in both sponsor and corporate leveraged finance transactions remains the most common form of loan facility. As syndicated loans are held mostly by traditional bank lenders, delayed-draw capital expenditure and acquisition facilities are a common feature in Australian syndicated loan financings. This contrasts with Europe and the US where delayed draw term loans are predominantly a feature of private credit loan financings (and rarely seen in syndicated loan financings).

Revolving credit facilities are a standard companion to term facilities, providing operational liquidity for working capital and general corporate purposes. In the past decade, the “super senior” revolving credit facility has become increasingly common in Australian financings. This development has been driven by the rise in private credit financings (where traditional bank lenders provide liquidity facilities on a first-out basis alongside the private credit fund term lenders) as well as the general convergence with European-style syndicated term loan structures.

Mezzanine and holdco financings, structurally subordinated to a borrower’s senior financing and with a separate, non-overlapping collateral and guarantee package, are also commonly utilised. First lien/second lien structures, however, are less common in the Australian market outside of real estate financings.

As noted in 2.1 Debt Finance Transactions, as DCM access in Australia is primarily confined to issuers that meet specific credit, leverage and/or industry profiles, DCM financing is an unsuitable alternative to a leveraged loan transaction.

Documentation Frameworks

Documentation in Australian debt finance transactions varies depending on the identity of the ultimate lenders. Domestic financings with take-and-hold Australian bank lenders typically use the APLMA Australian branch form of facility agreement (or a modified version thereof), with negotiation confined to key terms such as financial covenants and “permitted” covenants. APLMA’s Australian branch also provides a standard form of security trust deed that is widely accepted and used in the market. For specific asset classes or lending types, where APLMA has no equivalent documentation form (for example, leveraged or pre-export finance), market participants will default to LMA equivalents. Cross-border syndicated leveraged financings involving international banks adopt LMA documentation reflecting regional (and increasingly global) terms.

In sponsor leveraged financings, documentation will often follow the individual sponsor’s regional or global precedents. A notable recent development in Australia has been the adoption by global sponsors of hybrid facility agreements combining an Australian law LMA-style facility agreement with New York-law-governed covenants and events of default. This trend mirrors established European sponsors’ practice of combining the familiarity of LMA mechanics with the flexibility of US high-yield covenants.

The sophistication and borrower-friendliness of Australian debt financing documentation is a function of each particular transaction’s lending base. In recent years, increased liquidity, supply-demand imbalance, competition among lenders and the increasing influence of private credit has driven borrower flexibility and loosened lender protections.

Traditional Bank Lenders and Syndicated Loan Financings

Traditional, domestic take-and-hold bank financings are characterised by relatively more conservative and restrictive terms, including constrained basket capacity for additional debt, restricted payments and investments, and stricter excess cash, asset sale and IPO proceeds sweeps. Covenants are driven by underlying asset type and credit quality. Where the lender or syndication base relies on meaningful participation by traditional bank lenders, one or more financial maintenance covenants are typical (with limited cure rights). Where the lender base comprises private credit funds, greater flexibility is available, including single financial maintenance covenants or covenant-loose or -lite structures.

Private Credit

As in other markets, private credit funds have been at the forefront of the convergence of Australian leveraged finance terms with those in the US and Europe. Private credit funds, both domestic and offshore, can offer structural and terms flexibility that are outside the investment mandates of most traditional or syndicated bank lenders, for example PIK interest.

Regardless of the terms adopted, a number of Australian-specific provisions will be commonly seen in Australian financing documentation. Notable examples are discussed below.

Featherweight and Springing Security Interests

The appointment of an administrator over an Australian obligor triggers a statutory moratorium under the Corporations Act 2001 (Cth) (the “Corporations Act”), blocking creditor enforcement rights for the duration of the administration. Section 441A of the Corporations Act, however, provides a critical carve-out: a secured creditor holding a perfected security interest over the whole, or substantially the whole, of the property of the obligor may enforce that interest within the 13 business-day “decision period” immediately following the administrator’s appointment.

Where a security package includes (sometimes substantial) carve-outs of excluded property from the scope of the collateral, a secured party may not hold security over “the whole” or arguably “substantially the whole” of the company’s assets for purposes of Section 441A. Accordingly, security documents customarily contain either a “featherweight” or “springing” security interest to plug the gap and combat this administration risk.

• A featherweight security interest attaches to and encumbers the grantor’s excluded property on day one, but is as light as a feather, securing only the last AUD1,000 (or equivalent) of the secured obligations. The security interest does not restrict dealing with the property that is the subject of the interest and will self-subordinate itself to any other security granted over that property. The result for the lender is that it has security over “the whole” of the grantor’s property, but does not receive the economic benefit of security over assets to which it is not entitled given its claim on such assets is limited to the fixed amount.
• A springing charge is employed where a day-one charge (even for a featherweight fixed sum) could result in adverse consequences to a grantor (for example the violation of third-party agreements, licences or authorisations) or where assets are required to be unencumbered for other purposes (for example accounts receivable for securitisation facilities). The springing charge remains dormant and does not attach to the grantor’s excluded property until immediately prior to the appointment of administrators, at which point it “springs” into existence as a fixed charge. The result is that the lender has security over “the whole” of the grantor’s property and, unlike the featherweight, does receive the economic benefit of security over the assets that were initially excluded from the charge.

The confusion that often attends the distinction between featherweight and springing charges has been compounded by the development of the “springing featherweight” charge which combines the features of each.

It should also be noted that while featherweight and springing charges are market standard in Australian security agreements, their efficacy has not been tested before courts.

Statutory Decision Period

The 13 business-day decision period can impact documentation in other ways. Intercreditor agreement instructions provisions often contain a clause stipulating the timeframes within which a security trustee must seek instructions from creditors in the event of an Australian administration, and an express recognition of the security trustee’s discretion to appoint receivers absent instructions within the decision period.

Depending on the specific terms of the financing, other provisions may be required to ensure secured creditors do not forfeit substantive rights and remedies due to collective action issues, procedural delays or the application of grace or standstill periods.

Ipso Facto Clauses

The ipso facto regime introduced under the Corporations Act restricts the enforcement of contractual rights (such as termination or acceleration) that are triggered solely by reason of a counterparty becoming the subject of certain insolvency regimes, namely voluntary administration, a scheme of arrangement, the appointment of a managing controller over the whole or substantially the whole of the counterpart’s property or a small business restructuring. While financial products, bonds, promissory notes and syndicated loan agreements are excluded from the regime, the exemption does not extend to all financing arrangements (for example, bilateral facilities) nor has the scope of such exceptions been judicially considered. As a precaution, even syndicated loan facilities often include APLMA standard form ipso facto clauses which, in the event of an Australian borrower’s administration (which would otherwise constitute an event of default and permit acceleration), allow the agent to accelerate and make a claim for the full amount of the obligations against each guarantor not itself the subject of a stay.

Exclusion of PPSA Provisions

The Personal Property Securities Act 2009 (Cth) (PPSA) contains a number of default provisions that, unless expressly excluded, apply to security interests over personal property. Several of these provisions can operate in a manner that is inconsistent with the commercial intentions of the parties. It is standard practice in Australian leveraged finance transactions to exclude their application expressly in the intercreditor agreement, facility agreement or security documents. The market has adopted the PPSA exclusions contained in the “Model General Security Agreement Clauses” published by five major Australian law firms in 2013.

Banking Code of Practice

Where any lender is a signatory to the Banking Code of Practice published by the Australian Banking Association (the “Code”), the Code’s protections could apply where a criterion of application is met (for example, where a personal guarantee is provided). While the Code is unlikely to apply in most domestic or cross-border transactions, as a matter of course, facility agreements contain an express acknowledgment by the parties that the Code does not apply.

Trust Representations and Warranties

The prevalence of trusts in Australian corporate structures requires tailored corporate representations and warranties. Representations that no obligor holds assets on trust or, if trusts are present in a group, as to the trustee’s authority to enter into the finance documents and grant security, the absence of any breach of trust and the trustee’s right of indemnity from the trust assets are included.

Australian Interest Withholding Tax

Australia imposes a 10% withholding tax on interest payments by Australian tax residents (which are not operating through a foreign permanent establishment) and Australian permanent establishments of foreign residents to foreign residents (otherwise than those operating through an Australian permanent establishment) and Australian residents operating through a foreign permanent establishment.

Two main approaches are followed in Australian loan documentation to allocate interest withholding risk. Firstly, a facility agreement may contain a qualifying lender concept, largely following the LMA construct, whereby a non-qualifying lender bears interest withholding risk absent a change of law following the date on which it became a lender. Secondly, the borrower will seek to rely on the exemption from interest withholding tax afforded by the public offer exemption under Section 128F of the Income Tax Assessment Act 1936 (Cth) (“Section 128F”) and a gross-up will be paid for any withholding unless as a result of a lender being an offshore associate of the borrower (such that the Section 128F exemption does not apply).

If the interest withholding exemption provided by Section 128F is being relied upon, the financing documentation will typically contain the following representations, warranties and covenants to support Section 128F compliance.

• Arranger representations – the arranger will represent:
1. to have made invitations to at least ten, to the knowledge of the relevant officers of the arranger involved in the transaction, unrelated lenders that carry on the business of providing finance or investing or dealing in securities in the course of operating in financial markets (a “Qualifying Lender”); and
2. to have not made any offers to any lender that its relevant officers involved in the transaction on a day-to-day basis are aware is an offshore associate of the borrower.
• Borrower confirmations – if the borrower is involved in the offer process, it will confirm none of the potential offerees disclosed to it by the arrangers were known or suspected by it to be an offshore associate of it or an associate of any other offeree.
• Lender representations – the original lenders represent that they were Qualifying Lenders at the time of receiving the offer and that they are not offshore associates of the borrower.
• Information and co-operation – the lenders and arrangers agree to provide reasonably requested information within its possession or which it is reasonably able to provide to assist the borrower to demonstrate Section 128F compliance and, if Section 128F is not satisfied for any reason, each party agrees to cooperate and take reasonably requested steps to satisfy those requirements (with costs allocated depending on fault).

In borrower-friendly loan agreements, breach by a lender of its Section 128F representations or undertakings may also result in a loss of any gross-up for interest withholding. Otherwise, the borrower can seek damages for any resulting losses.

See 9.1 Tax Considerations.

Security Regime

Personal property and the PPSA

The primary legislative framework governing security interests in personal property in Australia is the PPSA. “Personal property” under the PPSA is a broad concept that encompasses all forms of property other than land and certain statutory rights, and operates analogously to Article 9 of the US Uniform Commercial Code.

Defining features of the PPSA regime include a fully electronic, national registration system, the capacity for security interests over a class of assets to automatically extend to after-acquired property of the same type without any further act of appropriation by the grantor, and a grantor’s ability to deal with collateral in the ordinary course of its business and convert it into proceeds without defeating the security interest (which attaches automatically to those proceeds). These features make Australia particularly well-suited to “all asset” general security arrangements.

Non-personal property and other statutory regimes

Categories of property outside of the scope of the PPSA include real property and assets that are the creation of statute, such as mining tenements, water rights and other statutory licences. The creation and perfection of security interests in real property and statutorily-created assets are governed by specific Commonwealth and State or Territory legislation.

Common law

The pre-PPSA common law regime and security interest characterisations retain relevance in certain contexts, including security arrangements involving a transfer of title, such as mortgages or transfers by way of security, and (as noted above) the granting and characterisation of security interests in certain non-personal property or assets that otherwise fall outside the scope of the PPSA or other applicable legislation. For example, it remains common in Australia for a PPSA security interest in shares to be characterised as a mortgage and for a security interest in land to be characterised as a fixed charge (which can then be perfected by a registered legal mortgage in accordance with applicable State or Territory law).

Perfection and Priority

All security interests subject to the PPSA may be perfected by registration on the Personal Property Securities Register (PPSR). In addition, security interests in tangible property can be perfected by possession, and certain categories of collateral (such as investment instruments, intermediated securities, and deposit accounts) may be perfected by control. Perfection by control ranks in priority above other means of perfection.

Properly registered purchase money security interests (PMSIs), being security interests granted to a seller or financier to secure the acquisition cost of collateral, attract “super-priority” over other security interests in the same collateral, including against an earlier-registered non-PMSI.

Perfection of non-PPSA security interests continue to be governed by common law or, for example in the case of real property, mining tenements and water access rights, specific statutory regimes (which vary by State and Territory).

Security Packages

Australia has historically been an “all asset” security jurisdiction. The relative ease with which security can be granted and perfected under the PPSA, combined with the absence of limitations on upstream and cross-stream security that complicate security packages in other jurisdictions, has meant lenders have routinely taken security over substantially all present and after-acquired property.

Today, however, Australian financings may adopt European- and US-style Agreed Security Principles (ASPs) under which certain categories of assets are specifically excluded from the scope of security (for example, real property or assets over which granting security requires third-party consent), certain general principles govern the scope of security (for example, cost-benefit analysis) and certain methods of perfection are excluded (for example, control other than in the case of shares).

Despite convergence with European and US collateral packages, aggressive “bare-bone” structures, consisting solely of pledges over shares, material bank accounts and material intercompany receivables have yet to be seen in Australian sponsor financings.

Guarantees

There are no material legal impediments to the granting of guarantees in Australia, subject to corporate benefit and financial assistance requirements. See 5.2 Key Considerations for Security and Guarantees.

A typical guarantee structure in an Australian financing will require all material subsidiaries, calculated by reference to EBITDA (and, potentially, also total assets), and other subsidiaries that satisfy a guarantor coverage test (calculated on the same basis and generally set at 80–90% of EBITDA and total assets) to accede as guarantors.

The increasing adoption of European and US-style ASPs in Australia has further loosened guarantor coverage by excluding a number of entities from the requirement to accede as guarantors, in particular non-wholly owned subsidiaries. This dilution in the scope of guarantees has also coincided with the relaxation in guarantor-to-non-guarantor value leakage covenant protections as Australian financing terms converge with those in Europe and the US.

Agency, Trust and Parallel Debt

The trust structure is a settled and recognised concept under Australian law. In Australian financings, a single security trustee will hold security on behalf of all present and future secured parties who each become a beneficiary under a trust. Security for future, undefined beneficiaries cannot be validly held on a mere principal–agent relationship (unlike, for example, the US and other civil law jurisdictions). If, therefore, security is being granted where the governing law of a credit agreement and intercreditor agreement does not recognise the concept of trust such that a security trust is not created, a standalone Australian trust is constituted (by means of a deed poll) on which Australian security can be held. By contrast, an English-law trust constituted under an LMA intercreditor agreement is sufficient for Australian security purposes, and in such circumstances no separate Australian trust would be required.

As a result, the parallel debt structure is not required in domestic Australian finance documentation. However, these provisions are common in cross-border finance transactions which include (or may include) guarantors and security grantors in civil law jurisdictions.

Restrictions on Upstream Security and Guarantees

Australian law imposes no specific restrictions on upstream or cross-stream security or guarantees and there is no statutory capital maintenance regime restricting upstream or cross-stream financial support. Upstream and cross-stream security and guarantees are nonetheless subject to corporate benefit and financial assistance requirements.

Corporate Benefit

Directors must be satisfied that granting a guarantee or security is in the best interests of the grantor itself (with the analysis conducted on a grantor-by-grantor basis). Trading subsidiaries that derive clear commercial benefit from a financing present straightforward cases; intermediate holding companies and special purpose vehicles with no independent operations require more careful analysis. Relevant considerations include indirect commercial benefits flowing to the grantor, adequacy of consideration received, and a company’s financial position at the time. Board resolutions containing corporate benefit statements are standard closing deliverables in debt finance transactions. Certain provisions of the Corporations Act can also aid a corporate benefit analysis. For example, Section 187 provides that a wholly-owned subsidiary’s director who acts in the best interests of its holding company is taken to act in the best interests of the subsidiary (if that subsidiary’s constitution permits it to act in the best interests of the holding company and the subsidiary remains solvent).

Financial Assistance

Sections 260A to 260D of the Corporations Act regulate a company’s provision of financial assistance to a person acquiring shares in that company or its holding company (including an offshore indirect holding company). “Assistance” is construed broadly, encompassing guarantees, indemnities, security and any other support that materially facilitates a share acquisition (for example the guaranteeing of a debt facility which financed acquisition-related fees and expenses, even if it did not finance the primary share sale consideration, would be considered financial assistance within the scope of Section 260A).

Financial assistance is generally permitted if it does not materially prejudice the interests of the company or its shareholders or its ability to pay creditors. A less nebulous exception is provided by Section 260B’s “whitewash” procedure, namely where assistance is approved by the company’s shareholders (and, if applicable, the company’s ultimate (and/or listed) Australian holding company) and certain notifications are made to ASIC.

While a transaction is neither void nor voidable if it breaches Australia’s financial assistance rules, any involved person (including lenders) is liable under the civil penalty provisions of the Corporations Act. As a result, and in light of the ease with which financial assistance can be approved under Section 260B, the general approach in Australia is: if in doubt, whitewash.

Requirement for Guarantee Fees

There is no requirement for a guarantor to receive a fee for the provision, or enforcement, of its guarantee.

Intercreditor arrangements are a foundational element of multi-creditor debt financings in Australia. Section 61 of the PPSA itself recognises the ability and validity of one secured party subordinating its security interests to another. While the APLMA Australian branch has published a standard form of security trust deed catering for pari passu secured loan facilities and hedging, there is no multi-ranking, multi-creditor APLMA standard form intercreditor agreement. As a result, borrowers with more complicated capital structures typically adopt an LMA-style intercreditor agreement that contemplates secured and unsecured creditors with different rankings under different financing products, including second-lien financings, super senior facilities, cash management products and hedging, mezzanine financings and senior secured notes, unsecured notes and intra-group lenders.

Section 563C of the Corporations Act expressly validates contractual subordination agreements between creditors, save where they would disadvantage a non-party creditor. As noted in 6.1 Role of Intercreditor Arrangements, Section 61 of the PPSA also recognises the validity of one secured party subordinating its security interests to another.

The Corporations Act also specifies certain creditor classes that rank in priority to secured claims. Sections 560 and 561, for example, provide that certain pre-appointment employee entitlements (including wages, superannuation contributions and payments in respect of leave or termination of employment) have priority over claims of a secured party with respect to security interests in circulating assets (defined in the PPSA as certain accounts, deposit accounts, currency, inventory, negotiable instruments as well as any other property where a secured party has given the grantor express or implied authority for its transfer to be made, in the ordinary course of business, free of the security interest). Section 443E of the Corporations Act also gives statutory priority to an administrator’s right of indemnity under Section 443D over claims of a secured party with respect to security interests in circulating assets. As a result, Australian security documents include provisions that seek to convert circulating assets into non-circulating assets upon the occurrence of certain pre-default trigger events.

The enforcement process adopted by secured creditors in Australia is invariably driven by the scope of the security package and the ultimate objectives of the secured creditor (for example, if the secured creditor is looking to exit its investment or restructure the debt facilities).

Enforcement of security in Australia is governed by both the finance and security documents that give rise to the security interests and applicable legislation, including the PPSA and Corporations Act. In order for a secured creditor to take enforcement action, the relevant security interests must have first become enforceable, which typically arises upon acceleration of amounts due under the finance documents.

Typically, a secured creditor will seek to enforce its security by appointing a receiver or receiver and manager (“Receiver”) to the grantor (where the security interest extends to the whole, or substantially the whole, of the property of the grantor) or a Receiver to the secured property (where the security is of a more limited scope). The Receiver assumes control of the secured property with a view to monetising all or a portion thereof to discharge the debt owed to the secured creditor. Australian security instruments typically empower a receiver to do anything in respect of the secured property that an absolute beneficial owner of the property is entitled to do at law, including taking possession and control of, and selling, the secured property. Receivers must also have regard to the statutory and common law duties applicable to them when realising secured property.

In addition to its rights to appoint a Receiver, a secured creditor who holds security over the whole, or substantially the whole, of a grantor’s property may also appoint voluntary administrators to the grantor if the security interest has become enforceable. This appointment triggers the formal voluntary administration process under Part 5.3A of the Corporations Act and enlivens a moratorium on creditor claims against the grantor.  It is open to a secured creditor with security over the whole, or substantially the whole, of the property of a grantor to appoint both voluntary administrators and Receivers to the grantor for the purposes of enforcing its security, thereby obtaining the benefits of both insolvency processes.

Specific legislative requirements must also be followed where enforcement action in respect of real property is contemplated, as determined by the law of the State or Territory in which the real property asset is located.

Australia has a dual-track regime for enforcing foreign judgments, depending on the jurisdiction from which the judgment originates.

Statutory Route

The Foreign Judgments Act 1991 (Cth) and the Foreign Judgments Regulations 1992 (Cth) provide a registration mechanism for money judgments made by courts in certain prescribed foreign jurisdictions (including the United Kingdom, Hong Kong and Singapore, among others). Once registered, the foreign judgment becomes enforceable in Australia without the need to commence separate Australian proceedings in respect of the underlying debt.

Eligible judgments are typically registered in a State or Territory Supreme Court and must meet the following basic requirements:

• be for the payment of a sum of money;
• be final and conclusive (noting that a pending appeal does not affect this status);
• remain enforceable in the originating country; and
• not be discharged or wholly satisfied.

Judgments from a New Zealand court have their own separate statutory registration regime under the Trans-Tasman Proceedings Act 2010 (Cth), which facilitates the enforcement of those judgments in Australia.

Common Law Route

Where the relevant foreign court is not prescribed under the statutory framework (including courts of the United States, China and Japan, among others) or otherwise does not qualify for recognition under the statutory framework, recognition of the foreign judgment can be sought under the common law, which requires separate proceedings to be commenced in an Australian court. The requirements to establish an application for recognition under the common law broadly overlap with the statutory requirements noted above, but relevantly, it must be established that the foreign court has exercised a jurisdiction that Australian courts recognise. 

Enforcement

Once a judgment is formally recognised via either the statutory or common law routes, a judgment creditor may then enforce that judgment in accordance with Australian law. The most common method involves the serving of a creditors’ statutory demand on the debtor company. A failure to comply with the demand within 21 days gives rise to a presumption of insolvency, enabling the creditor to apply to wind up the debtor company. Other available methods include writs for the sale or delivery of property, asset freezing orders and garnishee orders.

Schemes of Arrangement

Other than voluntary administration and receivership, being the primary formal insolvency processes under the Corporations Act for business rescue and reorganisation, an Australian company can restructure its debt obligations via a creditors’ scheme of arrangement (“Scheme”). Schemes are flexible instruments and can be used to achieve a variety of outcomes for a business, including deleveraging, debt-to-equity conversions, mergers and/or the issue of new debt/equity instruments.

A Scheme is a formal and binding compromise between a company and its creditors (or a class or classes of them) sanctioned by either the Federal Court of Australia or the Supreme Court in the relevant State or Territory where the Scheme is filed. Schemes and the process to be followed when implementing one are governed by the Corporations Act.

In order to approve the Scheme, a simple majority (more than 50%) in number of creditors present and voting who collectively hold at least 75% of the total amount of the debts and claims of the creditors present and voting must vote in favour of the Scheme. The Court must also approve the Scheme. Once approved, a Scheme binds all creditors in the relevant class, including dissenting creditors.

Commencing Scheme proceedings does not automatically impose a moratorium on enforcement action against the Scheme company. However, the Court has discretion to make orders restraining enforcement action during the Scheme process, which has the effect of imposing a moratorium on claims against the company during this period. This will restrain secured and unsecured creditor action and preserve the status quo while the Scheme is being promoted. Notwithstanding this, a Scheme is typically only pursued in Australia where the relevant threshold of creditors supportive of the Scheme have signed a lock-up agreement, agreeing to standstill, forbearance and debt trading restrictions.

Informal Workouts

While not a formal reorganisation procedure, informal workouts are regularly pursued in Australia as a means of restructuring debt obligations. Such arrangements are negotiated (typically involving standstill arrangements at the outset) so will only bind those creditors that are party to them.

Enforcement in Insolvency

The ability of a creditor to take enforcement action in insolvency is dependent on the insolvency process that is instigated.

Voluntary administration

In Australia, the voluntary administration process under Part 5.3A of the Corporations Act results in the applicable company being placed under the control of an administrator (who must be a registered liquidator). The administrator assumes control of management of the company’s business and property to the exclusion of its directors. Critically, the administrator owes a duty to act in the interests of all creditors of the company. Voluntary administrators can be appointed by the directors of a company who have resolved that the company is insolvent or likely to become insolvent at some future time, by a secured creditor who holds security over the whole, or substantially the whole, of a company’s property if the security interest has become enforceable, or (less commonly) by a liquidator or provisional liquidator of the company.

In a voluntary administration the following applies.

• Creditor claims are stayed for the duration of the administration process. Unsecured creditors and creditors who do not have security over the whole, or substantially the whole, of the property of the grantor are stayed pending the administration’s outcome, which will result in either:
1. the company being returned to the control of its directors (an uncommon outcome once a company is under external administration);
2. a deed of company arrangement being executed to effect a restructuring and/or sale transaction; or
3. liquidators being appointed to the company.
• Only a secured creditor holding a security interest over the whole, or substantially the whole, of the grantor’s property can enforce its security interest by appointing a Receiver within the 13 business-day “decision period” that commences on the appointment of administrators. After this time, the secured creditor may only take enforcement action with consent of the administrators or leave of the court. For this reason, secured creditors typically seek a written consent from the administrators during the decision period to preserve their ability to take enforcement action at a later time, should that be deemed necessary.
• Importantly, the statutory moratorium only affects companies in administration, so where a creditor holds a guarantee or security from a party that is not in an insolvency process, that security can be enforced in accordance with its terms.

Receivership

A secured creditor may enforce its security by appointing a receiver and manager to the grantor (where the security interest extends to the whole, or substantially the whole, of the property of the grantor) or a receiver to specific secured property (where the security is of a more limited scope). A receiver assumes control of the secured property with a view to monetising all or a portion thereof to discharge the debt owed to the secured creditor. Unlike an administrator, a receiver’s primary duty is owed to the appointing secured creditor (though the receiver also has statutory duties, for example to use all reasonable endeavours to sell secured property for its market value or (where it does not have a market value) the best price reasonably obtainable in the circumstances, which protects the interests of the broader creditor pool).

Unlike an administration, a receivership is not accompanied by a statutory moratorium, with the result that a creditor can still take enforcement action against a company in receivership, subject to any intercreditor or subordination agreements to which the creditor is bound and the operation of the ipso facto regime (see 4.3 Jurisdiction-Specific Terms).

Liquidation

Once a winding-up order is made or a creditors’ voluntary liquidation commences, a statutory stay arises on proceedings and enforcement action against the company. Secured creditors, however, retain the right to enforce their security interests and are not required to prove in the liquidation to the extent their security is sufficient to discharge their debt.

Clawback risks

There are various clawback considerations under both the PPSA and the Corporations Act that creditors in Australia should bear in mind should the relevant grantor company enter liquidation.

A failure to perfect a security interest within the requisite statutory timeframes can result in that security interest vesting in the grantor upon the appointment of administrators or liquidators pursuant to Section 588FL of the Corporations Act, with the effect that the secured creditor will lose the benefit of its security and be left with an unsecured claim against the grantor.

Under the Corporations Act, liquidators have broad powers to seek orders from the Court to unwind certain pre-insolvency transactions. Key categories of voidable transactions include:

• unfair preferences – transactions that result in a creditor receiving from the company in respect of an unsecured debt more than the creditor would receive if the transaction were set aside and the creditor were to prove for the debt in a winding up;
• uncommercial transactions – transactions entered into by a company where it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction in light of the transaction’s benefits and detriments to the company;
• unreasonable director-related transactions – transactions that involve a payment made by the company to a director or another person on behalf of, or for the benefit of, a director in circumstances where it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction; and
• creditor-defeating dispositions – transactions that have the effect of preventing assets of the company from becoming available to the company’s creditors or otherwise hindering the ability of the company’s creditors in realising a benefit in a liquidation.

Each type of transaction has its own hardening period (referred to as a “look-back period”) during which a liquidator may challenge that transaction.

In addition, a security interest in circulating assets granted to secure a pre-existing debt in the 6 months prior to the appointment of liquidators to a grantor can be declared void against the liquidator under Section 588FJ of the Corporations Act in certain circumstances.

Priority of payment

Secured creditors in Australia have priority to the property the subject of their security.  Where the security extends to both circulating and non-circulating assets, secured creditors have first priority over non-circulating assets, but (as described above) certain employee creditors are entitled to be paid ahead of secured creditors from the proceeds of circulating assets.

For all other creditors, the statutory waterfall under Section 556 of the Corporations Act broadly provides for distributions to be applied in the following order of priority:

• the insolvency practitioner’s remuneration and expenses (this includes disbursements and fees of advisers);
• certain employee entitlements (including unpaid wages and superannuation); and
• unsecured creditors on a pari passu basis.

Shareholders, in their capacity as members of the company, are only entitled to any surplus after all creditors have been paid in full.

Interest Withholding Tax, Section 128F Exemption and Other Interest Withholding Tax Exemptions

As noted in 4.3 Jurisdiction-Specific Terms, Australia imposes a 10% withholding tax on interest payments by Australian tax residents (which are not operating through a foreign permanent establishment) and Australian permanent establishments of foreign residents to foreign residents (otherwise than those operating through an Australian permanent establishment) and Australian residents operating through a foreign permanent establishment.

A key exemption to interest withholding tax is the public offer exemption for debentures, debt interests and syndicated loans issued by an Australian resident company (or a non-resident company carrying on business at or through an Australian permanent establishment) under Section 128F (a similar exemption applies to issues by certain Australian trusts under Section 128FA).

The primary public offer exemption applies where interests in a debenture or debt interest or syndicated loan were offered to at least ten persons, each of whom was (i) carrying on a business of providing finance, or investing or dealing in securities, in the course of operating in financial markets and (ii) not known or suspected to be an associate of any other offeree. To be a genuine public offer, the offer must contain the key commercial terms of the transaction and be open for a reasonable period of time.

An invitation will also satisfy the public offer test if it is made publicly in electronic or other form that was used by financial markets for dealing in debentures or debt interests.

An issue of a debenture or debt interest or a syndicated loan facility will fail the public offer test if the borrower knew or had reasonable grounds to suspect the interest would be acquired directly or indirectly by an offshore associate of the borrower.

Financing documentation will typically include representations, warranties and covenants by each of the Arrangers, borrowers and lenders to support compliance with Section 128F. See 4.3 Jurisdiction-Specific Terms.

The Australian Taxation Office (ATO) has in recent years renewed its compliance focus on Section 128F. As a result, lenders and borrowers should maintain detailed records and evidence of compliance with Section 128F.

Separately, some of Australia’s tax treaties effectively provide for an interest withholding tax reduction or exemption for certain:

• lenders who are financial institutions which meet all of the relevant conditions not falling foul of any limitation of benefits article; and/or
• sovereign type entities.

In particular, tax treaties to which Australia is a party with certain jurisdictions (including the United Kingdom, the United States, Japan and New Zealand, but not including key jurisdictions such as Canada, Singapore, Hong Kong (with which Australia does not have a tax treaty) or China), provide an interest withholding tax exemption for payments to certain qualifying financial institutions (for example, bank lenders which satisfy certain other conditions).

Lenders which are sovereign entities may also in certain circumstances be exempt from Australian interest withholding tax under the codified sovereign immunity provisions in Australian domestic tax law.

In addition, Australia is party to a number of double tax treaties with certain jurisdictions (including the United Kingdom, the United States, Japan and New Zealand, though not other key jurisdictions such as Canada, Singapore, Hong Kong or China) which provide for a reduced or 0% interest withholding tax rate. However, the benefit of such double tax treaties is often limited only to certain qualifying financial institutions (for example bank lenders).

Third Party Debt Test: Thin Capitalisation Rules

Australia has thin capitalisation rules which, if applicable, can deny Australian debt deductions subject to exceptions including where Australian debt deductions do not exceed AUD2 million on an associate inclusive basis. The third-party debt test (TPDT) was introduced in Australia (for non-financial institutions) for income years commencing on or after 1 July 2023 as an alternative to the two other tests introduced at that time, being the:

• “fixed ratio test” – net debt deductions of the taxpayer are limited to 30% of tax EBITDA with denied deductions potentially able to be carried forward for 15 years; and
• “group ratio test” – net debt deductions of the taxpayer as a proportion of its tax EBITDA are limited to the worldwide group net third party debt deductions as a portion of the group’s accounting EBITDA).

By contrast, the TPDT does not deny debt deductions for debt that satisfies the TPDT. Due to its specific requirements, the TPDT is generally considered to be a narrow exemption. The key requirements of the TPDT are broadly:

• the borrower is an Australian entity borrowing directly from an entity which is not a 20% associate of the borrower, or indirectly through related party conduit financiers where the conduit finance conditions are also satisfied (which, for example, generally require back-to-back terms);
• the borrower uses all, or substantially all, of the proceeds of issuing the debt to fund commercial activities in connection with Australia;
• the lenders’ recourse for repayment of the debt is limited to:
1. Australian assets of the borrower;
2. membership interests in the borrower entity (unless the borrower entity has a legal or equitable interest, whether directly or indirectly, in an asset that is not an Australian asset); and
3. Australian assets that are held by an Australian entity that is a member of the obligor group in relation to the debt,

that are not credit support rights in the nature of a guarantee, security or other form of credit support, unless specifically permitted in the legislation.

The general principle of no-foreign-assets and no-foreign-credit-support means that borrowers relying on the TPDT will require provisions in finance documentation that effect a release of security and guarantees insofar as they would cause the requirements of the TPDT to be breached. The TPDT is therefore ill-suited to financings where the borrower group has, or may in the future have, greater than de minimis foreign assets or operations (where lenders would seek a typical multi-jurisdictional security package encompassing key EBITDA generating jurisdictions).

Stamp Duty

Stamp duty is levied at a state or territory level and therefore rules vary depending on the jurisdictions involved in the applicable transaction, which includes the acquisition of prescribed property either directly, or indirectly via the acquisition of certain interests in companies and trusts, and the creation of certain trusts. For example, in Victoria and New South Wales, instruments that create (or seek to create) trusts in relation to non-dutiable or unidentified property (for example turnover trusts in facilities agreements or security trusts in intercreditor agreements) will attract nominal stamp duty of AUD200 per trust in Victoria and AUD750 per trust in New South Wales.

Foreign Investment Review

Australia’s foreign investment regime, administered by the Foreign Investment Review Board (FIRB), requires approval for acquisitions of interests in Australian entities and land by “foreign persons” that meet certain criteria (including monetary thresholds). Private equity funds are frequently caught by this requirement.

A broad moneylending exemption to FIRB approval exists for financiers that acquire such interests for the purposes of (i) solely securing payment obligations under moneylending agreements or (ii) enforcing such security. Section 5 of the Foreign Acquisitions and Takeovers Regulation 2015 provides moneylending agreements must be agreements “entered into in good faith, on ordinary commercial terms and in the ordinary course of carrying on a moneylending business”, meaning even distressed financings made in good faith by loan-to-own funds are covered by the exemption.

Merger Control Regime

On 1 January 2026, Australia’s mandatory and suspensory merger control regime came into force under which businesses must notify the Australian Competition and Consumer Commission (ACCC) of acquisitions that meet specified thresholds and cannot complete these acquisitions without approval. As with FIRB approval, the ACCC’s merger control regime contains an exception to the requirement to notify an acquisition as a result of the enforcement of security interests in the ordinary course of business of providing financial accommodation and where the parties are dealing at arm’s length.

Lender Licensing

There are no general requirements for an offshore lender with no Australian nexus (other making a loan to an Australian borrower) to be licensed with any regulatory or governmental bodies in order to lend under an Australian loan facility.

Unfair Contract Terms

Australia’s unfair contract terms legislation applies to “standard form contracts” which are typically contracts prepared by one party and offered on a “take it or leave it” basis, with little or no opportunity for negotiation by the other party. As debt finance transactions are typically negotiated, rather than standard-form, transactions, the unfair contract terms regime does not apply.

Deeds

As with many other common law jurisdictions, deeds are an alternative contractual form to agreements in Australia. Deeds in Australia are used in certain specified statutory situations (for example conveyancing of non-Torrens real property or granting a power of attorney in Western Australia) or otherwise for common law purposes, for example where lack of consideration is a concern.

Historically, deeds in Australia were required to be signed, sealed and delivered to be valid. While the Corporations Act, and subsequent electronic execution legislation, has simplified the formality requirements for deed execution and delivery for Australian corporations (for example, signing in accordance with Section 127(1) of the Corporations Act satisfies all signing, sealing and delivery requirements), common law rules still apply to foreign and non-Corporations Act entities. In particular:

• sealing – the requirement for a deed to be sealed means the word “sealed” or a “seal” circle should appear on the signature page, regardless of whether the signing entity in fact applies (or has) a seal; and
• delivery – Australian law requires deeds to be delivered as a whole and in full. Delivery of deeds in the UK in the style developed in the UK following the High Court decision in R (on the application of Mercury Tax Group) v HMRC – where an extracted, signed signature page is returned by the executing party alongside (but not as a constituent part of) the execution form of deed – is not sufficient.