Key Takeaways
- • Ares Credit Group is executing its lowest level of private credit deals in five years, according to Peter Graf, partner and head of Asia direct lending, speaking at the Citi Investment Conference in Sydney on 20 October.
- • Graf described the firm as "cautiously optimistic" on Australian private credit, while saying underwriting standards are now higher than six months ago and that "you will see more and more cracks appearing."
- • Blackstone Credit and Insurance's Mark Glengarry acknowledged sector risks and dispersion across industries but argued the environment will reward managers with stronger skillsets and strategies.
- • Graf flagged real estate as a particular area of stress as interest rates rise, citing the collapse of Bathla, a Western Sydney property developer that entered administration on 25 August owing $3 billion.
- • Several funds, including Centuria's Bass Credit Fund and Bass Property Credit Fund, temporarily paused redemptions over exposure concerns following the Bathla collapse.
Summary
Ares Credit Group is enacting its lowest level of private credit deals in five years, a signal of heightened caution in the sector. Speaking at the Citi Investment Conference in Sydney on 20 October, Peter Graf, partner and head of Asia direct lending at Ares, said the firm remains "cautiously optimistic" about the asset class, with Australia better positioned than the rest of the world and Ares' portfolios "holding up pretty well." He cautioned, however, that persistent high inflation and interest rates, or pressure on input costs, could stress portfolios, and said Ares' underwriting standards are higher today than they were six months ago.
Graf summarized the mood as "no one is saying the sky is falling," but warned that more stress indicators will emerge, making manager selection and asset strategy critical for investors. He singled out real estate, which has been a major growth area for private credit over the past five to ten years, as especially vulnerable as rates rise, and urged close scrutiny of manager reporting and underwriting.
Mark Glengarry, senior managing director and head of APAC at Blackstone Credit and Insurance, who also appeared on the panel, acknowledged the potential for problems and noted that industries are under differing pressure. He argued that the global economy has more resilience than commonly assumed and that the current Australian environment is pushing managers toward a sharper focus on underlying companies, management capability and value creation, not solely loss minimisation.
The panel also addressed the collapse of Bathla, a Western Sydney property developer that entered administration on 25 August owing $3 billion. Since then, residential property and private credit have seen increased scrutiny, with several funds, including Centuria's Bass Credit Fund and Bass Property Credit Fund, temporarily pausing redemptions over exposure concerns. Graf noted Bathla has a complicated structure spanning many assets and lenders, and said that, based on press reports, lenders that conducted proper due diligence on the assets they underwrote would likely be fine.
Graf summarized the mood as "no one is saying the sky is falling," but warned that more stress indicators will emerge, making manager selection and asset strategy critical for investors. He singled out real estate, which has been a major growth area for private credit over the past five to ten years, as especially vulnerable as rates rise, and urged close scrutiny of manager reporting and underwriting.
Mark Glengarry, senior managing director and head of APAC at Blackstone Credit and Insurance, who also appeared on the panel, acknowledged the potential for problems and noted that industries are under differing pressure. He argued that the global economy has more resilience than commonly assumed and that the current Australian environment is pushing managers toward a sharper focus on underlying companies, management capability and value creation, not solely loss minimisation.
The panel also addressed the collapse of Bathla, a Western Sydney property developer that entered administration on 25 August owing $3 billion. Since then, residential property and private credit have seen increased scrutiny, with several funds, including Centuria's Bass Credit Fund and Bass Property Credit Fund, temporarily pausing redemptions over exposure concerns. Graf noted Bathla has a complicated structure spanning many assets and lenders, and said that, based on press reports, lenders that conducted proper due diligence on the assets they underwrote would likely be fine.
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