Australia's four biggest banks - WestpacANZ Bank, National Australia Bank and the Commonwealth Bank of Australia - hold AUD 1.4tn (approximately USD 960bn) in assets which are equivalent to around 140 per cent of Australia's gross domestic product, and also hold around 80 per cent of Australia's loans. These banks largely avoided the fallout from the 2008 financial crisis but Bloomberg reports that their profitability has "plunged" due to the Australian central bank cutting interest rates to record lows and the inquiry into financial industry misconduct. Reports suggest that these banks have recorded the worst results in a decade with "big falls in profit, reduced dividend payout and a challenging outlook". Brian Hartzer, chief executive of Westpac, said that this low interest rate, combined with strict new regulation has created tough conditions for Australian banks. KPMG notes that the four main banks made a combined cash profit of AUD 26.9bn in 2019, down 7.8 per cent from 2018.

In 2017, an inquiry into whether conduct by financial institutions fell below community standards and expectations was launched by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, as reported by the Australian Government. On 1 February 2019, the Commissioner, the Honourable Kenneth Hayne AC QC, issued a final report, which contained 76 recommendations (the “Report”). 

The findings in the Report prompted the Australian Prudential Regulation Authority ("APRA") to tighten lending standards, raise capital requirements and increase executive accountability. In July 2019 it also announced plans to reform remuneration arrangements with deputy chair, John Lonsdale, noting that the existing remuneration system did not encourage the right behaviour from financial institutions. 

Australian corporate watchdog, the Australian Securities and Investments Commission ("ASIC") has taken a "why not litigate" approach in light of the Report which has resulted in an increase in court actions against financial institutions. 

On 1 October 2019, the Reserve Bank of Australia cut interest rates to 0.75 per cent. Governor Philip Lowe suggested that an extended period of low interest rates may be needed to increase employment (unemployment hit 5.3 per cent in August 2019) and to address inflation with the hope of bolstering consumer confidence to revive household spending. Despite this, the Australian retail, construction and property sectors continue to show pockets of stress, with a number of retailers and private developers entering into insolvency this year.  

In July 2019, the APRA ordered Westpac, ANZ Bank and National Australia Bank to increase their capital holdings by AUD 500m (approximately USD 384m) each. The Commonwealth Bank of Australia added AUD 1bn to its capital buffer in May 2018. These increased capital requirements and additional regulation have led to a significant increase in activity by alternate capital providers in the Australian market as banks are less likely to lend to assets that are low or non-income generating (such as land banking and construction funding). MaxCap Group, an Australian and New Zealand commercial real estate debt specialist which has AUD 3.98bn under management, suggests that the funding gap in the real estate space will reach AUD 50bn by 2023.


We appreciate the assistance of Timothy Sackar and Madeleine McCloy of Clayton Utz with the following discussion of Australian law, regulation and practice.


Australia has a federal system of government comprised of three arms: the Parliament of Australia which consists of the Senate, the House of Representatives and the Queen of England represented by the Governor-General of Australia (the legislative branch); the Australian Government (the executive branch); and the High Court of Australia and Federal Courts (the judicial branch). Each of Australia's six States and two Territories also has its own system of courts and governments. The laws of Australia are largely derived from the English common law system.


In recent years, Australia has implemented significant reforms to its personal and corporate insolvency legislation. In addition to the predominantly procedural reforms introduced under the Insolvency Law Reform Act 2016 (Cth), which came into force on 1 March 2017, further amendments have been made as a result of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth), which introduced two significant changes: 

  1. "Safe Harbour":  The safe harbour reforms, which took effect on 19 September 2017, provide a defence for directors against insolvent trading where the company is or may be insolvent. These protections have been introduced in the context of Australia's strict liability provisions for insolvent trading, which have typically deterred directors from seeking to navigate times of financial distress by implementing alternative strategies to formal insolvency processes. The safe harbour protections can be sought from the time the directors start to develop courses of action that are "reasonably likely to lead to a better outcome" for the company than administration or liquidation. Importantly, the protections are not available to directors in circumstances where the company has not complied with its obligations in relation to tax and employee entitlements.
  2. "Ipso Facto": For some contracts entered into after 1 July 2018, there is now an automatic stay of parties' enforcement rights where those rights are triggered solely as a result of an insolvency event in relation to the counterparty. This includes situations where a company enters into a scheme, or a receiver or voluntary administrator is appointed. While the reform seeks to preserve value in the business, allowing it to continue to trade through a formal restructure, for creditors a range of rights previously relied upon will be unenforceable for the period of the stay, for example, rights to terminate, accelerate, novate or assign. 

As yet, the Australian Courts have not been asked to give significant judicial consideration to the provisions introduced under the Safe Harbour or Ipso Facto reforms given their relatively recent introduction as law.  


A third reform currently in motion is the introduction of a legislative amendment to combat illegal "phoenix activity" (the same concept as in the UK) by financially distressed and insolvent companies, which is estimated to have cost the Australian economy up to AUD 5.1bn in FY16. On 4 July 2019, following a failed attempt earlier this year, the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was introduced for a second time in the House of Representatives.  The Bill is still being considered before federal Parliament. If passed as statute, it will grant additional powers to ASIC and the Australian Taxation Office ("ATO") as well as appointed liquidators. The Bill's amendments include:

  • empowering liquidators and/or ASIC to recover company property that is disposed of through a "creditor-defeating disposition" (i.e., for less than market value in a way that seeks to defeat the interests of creditors) and to penalise directors and others responsible for that disposition;
  • holding directors accountable for misconduct by prohibiting them from resigning and leaving a company without a director; 
  • empowering the ATO to hold directors personally liable for certain tax liabilities of the company; and

authorising the ATO to retain tax refunds where a company has failed to lodge a return. 


  • Generally no licence is required for fund investors lending to Australian borrowers.
  • Assignment and novation are the most common forms of transfer in Australia.
  • Consideration should be given as to whether the loan being transferred constitutes a loan under a "debenture" which may trigger insider dealing provisions under the Corporations Act.
  • Generally a Facility Agent will act as agent for the syndicate and a Security Trustee will hold the security granted by the borrower on behalf of and for the benefit of the lenders in the syndicate from time to time. 

A 10 per cent interest withholding tax is ordinarily payable on interest payments to non-resident investors. Stamp duty and income tax may also apply.


Certain types of entities, including authorised deposit-taking institutions, in Australia such as banks, investment banks, branches of certain foreign banks, building societies and credit unions are required to hold an Australian Financial Services Licence (“AFSL”). These licence requirements typically do not apply to fund investors (domestic or otherwise).

Buying and selling loans in the secondary market is generally not regulated and investors are not typically required to hold an AFSL (subject to some limited exceptions).

However, investors may need to be registered with the APRA, depending on the nature of their assets in Australia (as required under the Financial Sector (Collection of Data) Act 2001). Such registration is straightforward and would require an investor to provide certain details about its business and structure.

In general, Foreign Investment Review Board ("FIRB") approval is not needed for lenders involved in a money lending operation to take security, but sometimes on enforcement FIRB approval is needed after a grace period has expired.

Notwithstanding the above, Australian facility agreements may require incoming financiers to be a "bank or financial institution" or to have a specified credit rating. Transfer restrictions such as these are a matter of interpretation under Australian law and local counsel can advise on transfer mechanics, including whether a fund investor should enter into a funded participation arrangement.



Assignment and novation are the common methods for transfer in Australia. These are equivalent concepts to those under English law. An assignment effects a transfer of rights only, and is ordinarily accompanied by an assumption of obligations, whereas a novation effects a transfer of both rights and obligations. However, advice should be sought from local counsel prior to entering into an assignment of debt or security as significant stamp duty may be payable in certain States or Territories in Australia (such as Queensland) following such assignment.

A prescribed form of substitution certificate will typically be included in a syndicated facility agreement. It will usually contain provisions to effect a novation, including the releasing of the outgoing financier and the borrower of their obligations to each other under and in respect of the facility from the date of transfer. Notification to the borrower and any other obligor may also be required.

Where security is not held by a Security Trustee for the benefit of the lenders in the syndicate from time to time (e.g. in a bilateral loan arrangement) a novation may result in a release of any applicable guarantee and security or could lead to new hardening periods applying. Accordingly, the new lender will need to ensure that it takes all necessary steps to ensure it obtains the benefit of any guarantee and security. Typically, it would do so by having the security assigned when the debt is novated, and geting guarantee and security confirmations as well as transfers of all security registrations. 

Use of funded participations using either the LMA or LSTA standard forms is common in Australia. Lenders are rarely required to obtain borrower consent to enter into a sub-participation arrangement. However, occasionally the facility agreement will require the consent of, or notice to, the borrower before a sub-participation agreement can be entered into.


Consideration may need to be given as to whether the loan being transferred constitutes a loan under a "debenture" for the purposes of the Corporations Act 2001 (Cth) (the "Corporations Act"). If this is the case, the incoming financier should make an assessment as to whether the insider dealing provisions under the Corporations Act are applicable to it, having regard to its relationship with the borrower.



Australian law recognises the concept of a trust

In syndicated facilities, generally a Facility Agent will act as agent for the syndicate and a Security Trustee will hold the securities granted by the borrower on behalf of and for the benefit of the lenders in the syndicate from time to time. Accordingly, in order to take the benefit of existing security an incoming lender should comply with the covenants in the finance documents, which typically include an accession to the security trust deed and any applicable intercreditor arrangements. No additional steps need to be taken to perfect the new lender’s rights to the security (other than a check of the national Personal Property Securities Register (established under the Personal Property Securities Act 2009) (“PPSR”)  and the relevant state based land title register to satisfy itself that the security and mortgages were duly registered at the time of creation).

In bilateral facilities, the security is ordinarily granted directly in favour of the lender. Accordingly any security must be transferred to the new lender by assignment. The new lender would also need to ensure that all necessary steps are taken to perfect the security interest, including registration of its interest as a secured party on the PPSR, typically by transferring the registration from the existing financier into its name and transferring any real property mortgages to the new financier. If the new financier is a foreign lender then it may want to interpose a new security trustee to make registration of and dealing with security interests and mortgages simpler.

The approval of the FIRB may also be required in both syndicated or bilateral arrangements if an offshore lender will hold security over real estate and does not fall within the so-called "moneylenders exemption" under the Foreign Acquisitions and Takeovers Act 1975 (Cth).

Local counsel should be consulted to advise on the steps to effect a transfer of security.



Stamp duty laws in Australia vary between each State and Territory. Such laws may apply to an assignment or novation of a debt or interest in secured property where such debt is located in the relevant State or Territory. Therefore, the transfer of an unsecured loan may be subject to stamp duty depending on the location of the debt. The transfer of a secured loan may also be subject to stamp duty depending on the location of the secured property. However, most (but not all) jurisdictions offer an exemption or concession on the transfer of a security over real estate. Security over non-real estate assets could still attract duty at ad valorem rates.


Income tax may also apply in certain circumstances, including where the transferor has a "permanent establishment" in Australia.

Local counsel can advise on the direct and indirect taxation implications of a debt trade.


A 10 per cent interest withholding tax is ordinarily payable on interest payments to non-resident investors. This may be reduced in certain circumstances, including where (i) the investor is domiciled in a jurisdiction that has a double taxation treaty with Australia (and that treaty includes a relevant exemption/reduction) or (ii) where the loan is made by way of debenture or under a syndicated facility agreement ("SFA") and meets the requirements of the "public offer test" under section 128F of the Income Tax Assessment Act 1936 (Cth) (the most commonly used qualification test requires, amongst other things, that the SFA or debenture be offered to ten or more unrelated financiers who are not related to the borrower (subject to certain limited exceptions)).  A further requirement for SFAs is that at least AUD 100m is available for draw down by Australian borrowers at the date of the first utilisation under the SFA and that there are at least two lenders.

The proceeds of a claim under a guarantee or from enforcing security may be subject to 10 per cent interest withholding tax, to the extent that the proceeds are in the nature of interest or in substitution for interest.



Our October Trade Alert reviewed the fallout following the 23 September 2019 compulsory liquidation of Thomas Cook. Since publication there have been further developments:

  • Airport Slots: It was announced on 8 November 2019 by KMPG (acting as Special Manager) that easyJet acquired Thomas Cook’s slots at Gatwick Airport (12 summer slot pairs and 8 winter slot pairs) and Bristol Airport (6 summer slot pairs and winter slot pair) for GBP 36m. It was also reported that Jet2 (owned by the Dart Group) bought Thomas Cook's slots at Manchester, Birmingham and Stansted for an undisclosed price. The value attributed to the airline slots pursuant to these sales is higher than that predicted by AlixPartners in the Liquidation Recovery Analysis prepared in August 2019 (the "Liquidation Recovery Analysis"), which suggested a minimum value of "nil" and an upper valuation of "variable"for the airport slots. 
  • Thomas Cook Germany: Anex Tour, a Turkish tour operator, will reportedly take over Bucher Reisen & Öger Tours GmbH(a Guarantor under the EUR 750,000,000 6.35% Senior Notes due 2022 (the "2022 Notes")) including its 84 employees. This transaction is subject to the approval of the provisional creditors' committee of Thomas Cook GmbH (a Guarantor under the 2022 Notes and the EUR 400,000,000 3.875% Senior Notes due 2023 (the "2023 Notes")) and the antitrust authorities. It was reported at the start of November that the company will be split into separate business parts to be sold instead of being sold as a whole. On 27 November 2019, the district court of Bad Homburg opened formal insolvency proceedings for 6 German Thomas Cook entities - Thomas Cook Touristik GmbH (Guarantor under the 2022 Notes and 2023 Notes), Thomas Cook GmbH, Bucher Reisen & Öger Tours GmbH, Neckermann Holding World GmbH, Thomas Cook Vertriebs GmbH and Thomas Cook Airport Service GmbH
  • Thomas Cook travel agencies: Galeria Karstadt Kaufhof will take on 106 travel agencies as well as the German online platform. The deal is subject to Thomas Cook GmbH's creditors' committee’s approval.
  • Intellectual Property Assets: Fosun International, a Chinese conglomerate formerly Thomas Cook's largest shareholder, purchased the Thomas Cook brand name for GBP 11m giving it access to certain hotel brands, trademarks, websites, social media accounts and software. This was higher than the value of GBP 1.3m - GBP 2.5m attributed to Thomas Cook's intellectual property by AlixPartners in the Liquidation Recovery Analysis.  


On 8 November 2019, HEMA, a general merchandise retailer active in the Netherlands, Belgium, Luxembourg, France, Germany, Spain, the UK and Austria announced that it had signed an agreement with Jumbo Supermarkets for commercial cooperation in the Netherlands and Belgium seeking to improve the market position of both companies. The companies aim to provide further details on this deal by the end of 2019

This announcement followed reports in October 2019 that HEMA’s notes lost nearly half of their value after a decline in EBITDA was noted in its Q2 results released on 2 October 2019. These results showed that pre-IFRS 16 Q2 adjusted EBITDA in 2019 was EUR 17.3m compared to EUR 23.1m the previous year. HEMA, in its press release, highlighted how its net sales in Q2 of 2019 were EUR 296.5m, an increase of 3.5 per cent compared to Q2 of 2018. Furthermore, like-for-like sales in Q2 of 2019 increased by 1.6 per cent compared to Q2 of 2018.

Everest Research, an independent investment research firm, published a report on 4 November 2019 regarding HEMA's liquidity position. Dutch newspaper Het Financieele Dagblad noted that Everest Research suggests that the restructuring of HEMA's debt is inevitable and that HEMA's owner, Marcel Boekhoorn, will have to provide EUR 100m in new capital as HEMA is not in a position to issue new bonds. The report also notes that at the end of Q2 2019, the group had a net debt of almost EUR 800m. Everest Research suggests that HEMA's cash position will fall from EUR 62m in August 2019 to EUR 18m next summer. HEMA is reported to have said, among other things, that it contradicts Everest Research's conclusions and does not recognise the numbers used to estimate HEMA's future liquidity position; HEMA is reported to be "considering further legal action".

HEMA’s 2018 Annual Report provides a summary of HEMA's capital structure.


On 25 November 2019, the Paris Commercial Court granted a six-month extension to Casino’s observation period under sauvegarde, which was originally due to end on 25 November 2019

On 21 November 2019, Casino completed its refinancing plan (the “Plan”). The Plan was announced on 22 October 2019, with the intention to strengthen Casino’s liquidity and financial structure enabling it to concentrate on its operating, financial and strategic objectives, as well as on executing its asset disposal plan.

The Plan included two transactions:

  • Raising EUR 1.8bn of financing through a EUR 1bn Term Loan B and a EUR 800m secured high yield bond (issued by Quatrim, a 100 per cent indirectly-owned subsidiary of Casino), both maturing in January 2024.
  • Extending EUR 2bn of confirmed credit lines in France, maturing in October 2023. This brings Casino’s undrawn confirmed credit lines in France to EUR 2.3bn with an average maturity of 6 years.

The Term Loan B and secured high yield bond proceeds allowed the group to finance the buyback offer of EUR 806m on bonds maturing in 2020, 2021 and 2022, repay EUR 630m of drawn credit lines and pay fees and commissions related to the transaction. The remaining EUR 290m has been placed into a segregated account which is dedicated to debt repayment.


Torm is a Danish pure play product tanker company and a leading carrier of refined oil products. Torm released its 2019 third quarter report in November 2019, which was more positive than anticipated, with Torm outperforming on revenues.

Torm announced on 21 November 2019, that it will increase its share capital by 74,010 A-shares (corresponding to a nominal value of USD 740.1) as a result of the exercise of a corresponding number of Restricted Share Units. The new shares were admitted to trading on Nasdaq in Copenhagen on 25 November 2019. After the capital increase, Torm’s share capital will amount to USD 743,353.89 divided into 74,335,389 A-shares of USD 0.01 each, one B-share of USD 0.01 and one C-share of USD 0.01.


Axsesstoday, an ASX listed provider of finance to small and medium sized enterprises in hospitality, transport and other sectors, largely in connection with equipment finance arrangements, sold its subsidiaries to Cerberus Capital Management in  September 2019. The sale was effected through a deed of company arrangement which saw the operating business and certain subsidiaries sold to Cerberus as a going concern and the ASX-listed shell company being sold subsequently. An ASX announcement by the company confirmed that creditor claims were to be addressed through the establishment of a creditors trust.

Deloitte were appointed as administrators on 17 May 2019 followinging a turbulent period for the company which, in November 2018, announced the release of a reissued annual report for 2018, triggered in part by breaches of its lending arrangements being identified. The company breached covenants (and other requirements) under its bank loans and subordinated notes.

A company with a similar business model, ASX-listed equipment financier Silver Chef Limited, announced in September 2019 that it had also been sold, having entered into a share purchase agreement with a consortium of investors including Australian private equity firm Next Capital Pty Ltd.


Marlin Brands, wholesaler of consumer brands including homewares, kitchenware, toys and giftware across Australia and New Zealand, with reportedly more than USD 260m of annual revenue, was acquired by US alternative investment funds Oaktree Capital and Alceon Group in April 2019. Marlin Brands was put up for sale by its South African owner Coast2Coast Capital in 2018 after plans for an initial public offering were abandoned.



Please contact Iden Asl, Hannah Geddes, Lucy Hartland, Chloë Kealey or Lois Child with any queries regarding this month's Trade Alert.