The fallout from the collapse of property developer Bathla Group continues to reverberate through Australia's private credit market, with lenders taking matters into their own hands to recover money tied up in the failed construction giant.
In one of the latest deals, property investment and funds management group 360 Capital has revealed it acquired a senior loan facility for about $31.2 million through its private credit fund, funded by private investors and entities within the 360 Capital group.
A senior loan facility is the first mortgage debt in a commercial investment and ranks highest in repayment priority.
The ABC understands the debt was acquired from major private lender La Trobe Financial, relating to a Bathla development at 137 South Street, Marsden Park, in Sydney's north-west.
An artist's impression of 137 South St, Marsden Park apartments, as listed on the Bathla website. (Supplied: Bathla )
The Marsden Park project comprises 72 apartments and is nearing completion, according to two sources close to the construction.
Half of the apartments have already been pre-sold under contracts worth $25.8 million (excluding GST), 360 Capital said in a statement.
In August, La Trobe disclosed it had $38.1 million in loans to Bathla, comprising four residential loans and one development loan.
The ABC understands through this deal, La Trobe has sold its development loan, recovering all outstanding principal, interest and late-payment charges and significantly reducing its exposure to the collapsed developer.
Deal gives 360 Capital greater control
360 Capital's ASX-listed mortgage investment trust, the 360 Capital Mortgage REIT, already held an $8.9 million loan secured against the development, which ranked behind La Trobe Financial for repayment.
The trust has invested a further $5.2 million in the deal.
"The step was not taken lightly, but is very important to protect the value of the trust's subordinated position," the company said.
The deal means entities associated with 360 Capital now control both the first and second mortgages over the development, giving them greater influence over how the project is completed and the debts recovered.
Morningstar equity analyst Winky Tan said lenders holding first mortgages were in a much stronger position to recover their money, while mezzanine lenders further down the repayment queue risked losing most, if not all, of their investment.
"When you're able to finish the project, you can sell it as a finished product, which will have a much higher valuation than a half-finished project," she said.
Following the purchase, advisory firm Wexted was appointed as receiver, with a focus on speeding up the process of obtaining occupancy certificates and settling the 36 pre-sold apartments.
360 Capital executive chairman Tony Pitt said the group expected to recover the full amount owed to it under the loan.
Ms Tan cautioned that the ultimate financial outcome for any lender would depend on whether the remaining apartments could be sold and at what price, particularly given the downturn in the property market.
'Perfect storm' unfolding in private credit sector
Lenders including Centuria Bass and CVS Lane suspended withdrawals from some funds in August amid concerns about their exposure to Bathla.
MA Financial, which says it has no exposure to Bathla, also introduced withdrawal limits on some of its funds amid concerns more investors could seek to pull out their money.
Major private credit manager Metrics Credit Partners, which also says it has no exposure to Bathla, suspended withdrawals from some unlisted funds amid scrutiny of asset valuations.
Bathla's collapse has also put pressure on parts of Australia's opaque private credit sector. (ABC News: Berge Breiland )
Corporate regulator ASIC has previously warned of poor practices across the private credit sector, including questionable asset valuations, opaque fees and inadequate disclosure.
ASIC commissioner Simone Constant said the Bathla collapse highlighted the need for stronger oversight, warning the industry was now "beyond warnings" and should prepare for enforcement action.
Ms Tan described the sector as facing "a perfect storm" of higher interest rates and falling property prices, with developers potentially struggling to refinance their debts just as nervous investors sought to withdraw their money.
Morningstar expects growth in private credit funds to slow substantially in the near to medium term, potentially make it harder for developers to secure financing and further worsening Australia's housing shortage.