The pivotal role of the secondary debt market in the turnaround industry

Secondary debt is playing a vital role unlocking value in the Australian turnaround industry.

By Sebastian Hyde, Vantage Performance

Earlier this month, TMA NextGen Queensland members and their guests received a comprehensive overview of the secondary debt market in Australia and its vital role in the turnaround industry.

An audience of more than 85 professionals heard from an experienced discussion panel which included Peter Deans, Chief Risk Officer at BOQ, Paul Apathy, Partner at Herbert Smith Freehills and David Tozer, Managing Director at Tozer & Co.

One of the key points that stood out for many in the room was the importance of ‘return on equity’ and credit ratings for banks when considering trading debt.

The discussion also highlighted the prevalence of secondary investors in Australia. Indeed, most of the major restructuring in the Australian market is now being driven by secondary investors. For example, secondary debt is playing a pivotal role in recent high profile turnaround projects, such as Emeco, Boart Longyear and BIS Industries.

A broad set of tools is available to secondary investors to unlock value in the turnaround industry. The panel noted that secondary investors are more willing to take equity ownership or other upside i.e. ‘loan to own’ and design financial instruments to be fit for purpose to achieve a restructure.