Key Takeaways
- • ASIC has launched a formal investigation into the conduct of collapsed developer Bathla Group, which owes $3.4 billion to creditors, according to ASIC Commissioner Simone Constant.
- • ASIC's latest surveillance of 24 wholesale and retail private credit funds, managing $18 billion in assets under management, found complex and opaque structures were widespread and many poor practices identified a year earlier persisted.
- • Only two of 22 surveyed funds passed on the full economic benefits of interest earned and borrower fees to investors.
- • ASIC has issued six interim stop orders since September, including two notices to Angas Securities over undisclosed exposure to Bathla, with the regulator set to shift to enforcement action in 2027.
Summary
The Australian Securities and Investments Commission (ASIC) has confirmed a formal investigation into the conduct of Bathla Group, a Western Sydney-based developer that collapsed owing $3.4 billion to creditors. ASIC Commissioner Simone Constant described the collapse as a "concerning and dark case study" of practices in the private credit sector that must be eliminated, according to the report published by AAP and republished by SmartCompany. The announcement coincided with the release of ASIC's latest surveillance of the sector on Tuesday.
The surveillance reviewed 24 wholesale and retail private credit funds with combined assets under management of $18 billion. Constant said complex and opaque structures were rife. Bathla's borrowing arrangement involved more than 500 special purpose vehicles and more than 40 private credit lenders, creating competing interests that exacerbated fees and risks. Of 22 funds surveyed, only two passed on the full economic benefits of interest and borrower fees to investors. Practices around fees, disclosure, distribution and conflict management identified in the regulator's first private credit report a year earlier remained largely unchanged, though Constant acknowledged "pockets of improvement."
ASIC is also making inquiries into private lenders but has not yet opened formal investigations into them. Constant said the current period is the regulator's final warning before 2027, when it will move to enforcement action. She warned that funds would face stress given rising interest rates and slowing economic growth.
ASIC has issued six interim stop orders since September, including two notices to private credit firm Angas Securities. The regulator alleged on Monday that Angas failed to disclose its exposure to Bathla and the associated risks to investors. Angas executive chairman Andrew Luckhurst-Smith said the fund had little exposure to Bathla and had lost no money on its loans to the developer, attributing the discrepancy to a transcription error in a document provided to ASIC.
The surveillance reviewed 24 wholesale and retail private credit funds with combined assets under management of $18 billion. Constant said complex and opaque structures were rife. Bathla's borrowing arrangement involved more than 500 special purpose vehicles and more than 40 private credit lenders, creating competing interests that exacerbated fees and risks. Of 22 funds surveyed, only two passed on the full economic benefits of interest and borrower fees to investors. Practices around fees, disclosure, distribution and conflict management identified in the regulator's first private credit report a year earlier remained largely unchanged, though Constant acknowledged "pockets of improvement."
ASIC is also making inquiries into private lenders but has not yet opened formal investigations into them. Constant said the current period is the regulator's final warning before 2027, when it will move to enforcement action. She warned that funds would face stress given rising interest rates and slowing economic growth.
ASIC has issued six interim stop orders since September, including two notices to private credit firm Angas Securities. The regulator alleged on Monday that Angas failed to disclose its exposure to Bathla and the associated risks to investors. Angas executive chairman Andrew Luckhurst-Smith said the fund had little exposure to Bathla and had lost no money on its loans to the developer, attributing the discrepancy to a transcription error in a document provided to ASIC.
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