Debt trading in Australia is less active than more established capital markets such as the US, Europe and Asia. However, it’s a powerful tool to obtain a fast outcome and to maximise loan recovery with distressed development sites.
Section 420A of the Corporation Act governs how receivers realise assets of an entity, an extract of which is provided below:
“The EA (or MIP) must take all reasonable care to sell the property for:
- if it has a market value, not less than market value; or
- the best price that is reasonably obtainable having regard to the circumstances existing when the property is sold.”
The chart below highlights how a debt trade operates within a distressed development loan structure:
Comparing the traditional realisation process to a debt trade highlights some interesting opportunities:
s420A Asset Sale | Debt Trade | |
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Sale Process |
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Time period |
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Caveats or Encumbrances |
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Post Completion Obligations |
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Benefits |
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Limitations |
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If you would like further information about this article or would like to learn more about how Newpoint Advisory can assist, please contact Costa Nicodemou or Brett Lennane.