Australian Deal Execution: Adapting To the Changing Landscape

Debt deals — what will be different?

There is plenty of rethinking going on right now about the scope and type of deals that will be coming over this year and beyond. But what will be different about the way deals are done in Australia? We spoke to a few of Australia’s leading banks and debt advisors who gave us their expert take on what lies ahead.

More players, more interest, more complexity

As far as debt markets are concerned, Australia has traditionally been somewhat of a closed shop with local banks and institutions dominating the deal-making landscape. Yet there is a shift occurring.  Several experts we spoke to for The Evolution of Australian Debt Capital and Syndicated Loan Markets Explained commented on the increasing interest from banks and other players — particularly in Asia — to participate in Australian deals well before the COVID-19 pandemic began.

In line with everywhere else, the Australian economy is in for a rough ride over the medium term. However, assuming the economy stays on track, there is a view that Australia may fare better than others with Moody’s, Standard & Poor’s and Fitch Ratings confirming the country’s AAA credit rating and the OECD predicting that Australia is better placed than most to mount a recovery.

Commented one of the experts we interviewed, “If you're a global bank and you're looking to play in Asia-Pac, you look at a lot of the other countries and you're a lot more comfortable with Australia from a financial standing, a legal standing and a pricing perspective.”

Another banker indicated that the broader playing field was particularly true for syndicated deals.

“Deals traditionally [done] in Australia have gone to the majors and foreign banks that have Australian offices. Our team here speaks with lenders in Hong Kong, Singapore, China, Taiwan, South Korea, broader Europe and the U.S. regularly when we are syndicating deals.”

This means it's now possible to have participants in four to five different time zones. It's essential that when it comes to lender call recordings, documentation, lender materials and reports everything is in one easily accessible, central place. It’s also important to be able to accommodate the ways different countries or jurisdictions manage and execute deals. For example, some may utilize online portals, while others rely on emails. The key is to facilitate smooth data flow and secure file-sharing.

Of course, bubbling along in the background is the fallout from the recent Royal Commission inquiry into the financial sector. Regulators, compliance and risk managers are also expecting participants to be able to account for deals in greater detail and more comprehensively.

Doing it differently

With an expanding field of international players adding more participants and complexity to local deals, uncertain markets and more regulatory scrutiny, debt advisors and arrangers will need to think more carefully about the systems and processes they use to manage everything from book builds to deal execution.

Furthermore, with COVID-19 curtailing travel and requiring social distancing, deals are being done virtually. While we hope that we might soon be able to engage face-to-face, there’s a good chance that the way offers are marketed, books are built and deals are closed may never entirely go back to how it was pre-COVID-19.

The good news is that technology is already playing a big role in helping debt advisors and arrangers manage and execute more complex deals. This is particularly true in the deeper more commoditized markets such as the U.S.

For local debt advisors and arrangers, it's time to consider whether the way deals have been done pre-2020 and the systems and processes that support them make sense for a future with different, more diverse participants, more complexity and a little more social distance.