IFLR 1000
The Guide to the World's Leading Financial Law Firms

The international liquidity crisis has siphoned leveraged buyouts from the Australian markets. Capital constrained banks have restricted access to all but the most secure and expensive credit, and participate with only minimum underwriting exposure, dramatically reducing new deal flow and size....

The international liquidity crisis has siphoned leveraged buyouts from the Australian markets. Capital constrained banks have restricted access to all but the most secure and expensive credit, and participate with only minimum underwriting exposure, dramatically reducing new deal flow and size.

An uptick in asset finance and leasing transactions was a product of financiers' increasing wariness and desire for greater security. Liquidity drained borrowers of every grade, with many struggling to secure enough funds to refinance. Meanwhile acquirers have waited patiently for the most opportune use of their cash.

Acquisition financing has turned towards the distressed markets, with many deals involving a restructure of the target's existing facilities. Lawyers expect this trend to continue as the bank debt market contracts further as purchasers acquire highly-leveraged distressed targets.

The financial crisis took a bite out of Australian debt capital markets in 2008, when activity in this sector turned sharply from issuance to restructuring and buybacks; from wholesale to retail debt; and from a yield to a security outlook.The intervention of the Government Guarantee Scheme for Australian bank issuers has enabled Australian banks to expand their reach beyond what volumes and spreads market conditions would have permitted....

The financial crisis took a bite out of Australian debt capital markets in 2008, when activity in this sector turned sharply from issuance to restructuring and buybacks; from wholesale to retail debt; and from a yield to a security outlook.

The intervention of the Government Guarantee Scheme for Australian bank issuers has enabled Australian banks to expand their reach beyond what volumes and spreads market conditions would have permitted. Of course, the majority of issuance has come out of Australia's four leading banks.

The wholesale notes market has been accessible only with great difficulty for even AAA-rated corporate issuance, opening up a retail corporate bond market the jurisdiction hasn't tapped for over two decades. Several corporate bond transactions have been successfully marketed to retail investors in recent months.

The main activities in the debt capital markets throughout the year include government-guaranteed issues, hybrid securities, public-private partnership bond financing transactions and corporate restructurings.

But combined with the new window for retail investors and a resurgence of interest in the US Rule 144a and private placement markets, 2009 could be a more promising year for issuers and investors.

Equity raising surged with Australian debt capital markets effectively closed throughout much of the past year. The financial crisis underscored the fundraising needs of over-geared corporates, and debt covenants and balance sheets required everyone's attention....

Equity raising surged with Australian debt capital markets effectively closed throughout much of the past year. The financial crisis underscored the fundraising needs of over-geared corporates, and debt covenants and balance sheets required everyone's attention. Placements and accelerated rights offers provided many companies the best means to raise cash.

Australia has been a test case for new offering structures that have helped capital raising transactions keep pace with shifting and unstable markets, having made innovative changes streamlining disclosure and due diligence to capture narrow windows of opportunity in the market to raise equity.

For simple, fast, low risk and reliable capital raising, private placements have retained popularity, though most companies need more money than Australian Stock Exchange listing rule limitations on private placements permit.

Accelerated rights offers have also taken off in Australia's markets over the past year. In the uniquely Australian structure, which was put into legislation a year earlier, the institutional aspect of a rights offer is completed quickly on a placement timetable.

Although capital has been slow to move, practitioners have found a way to get it moving again after the Australia Securities and Investment Commission permitted disclosure relief for accelerated rights offers for institutional investors.

Australian equity markets have remained alive as others across Asia Pacific are moribund thanks in part to accelerated offerings, and some have suggested that an injection of Australian-style fund raising structures could revive capital markets in other jurisdictions.

The ongoing financial crisis continues to bedevil the Australian securitisation market, but there are positive developments. Two mitigating forces are a surge in the number of deals underwritten by investments in RMBS by the Australian Office of Financial Managements, and the widened range of securities acceptable to the Reserve Bank of Australia as eligible collateral under repos....

The ongoing financial crisis continues to bedevil the Australian securitisation market, but there are positive developments. Two mitigating forces are a surge in the number of deals underwritten by investments in RMBS by the Australian Office of Financial Managements, and the widened range of securities acceptable to the Reserve Bank of Australia as eligible collateral under repos.

Another government initiative, the Australian Business Investment Partnership - the so-called Rudd Bank - may help with the refinancing of issued CMBS that are maturing during 2009, although at the time of writing this injection still faces a number of political hurdles.

There have been numerous private transactions funded wholly or partly by bank balance sheets, demonstrating the ongoing use of securitisation structures and displaying a recognition that this funding technique is still sound. Australian securitisation practitioners have also kept busy restructuring transactions where the original sponsors have entered insolvency and the role of captive trustee, servicer and manager has been shifted to third-party providers.

Given the shortage of liquidity in the banking market, commentators note that securitisation will remain a vital force to meet the large demand for credit origination that is necessary for a sustained recovery in Australian economic growth.

The Australian M&A market has certainly changed since the heyday of 2007/2008 when the IFLR1000 breathlessly reported that "there has never been a more exciting time to be in the Australian M&A market".However the downturn couldn't be a better playground for strategic shopping, and strong-armed Aussie corporates have jumped in....

The Australian M&A market has certainly changed since the heyday of 2007/2008 when the IFLR1000 breathlessly reported that "there has never been a more exciting time to be in the Australian M&A market".

However the downturn couldn't be a better playground for strategic shopping, and strong-armed Aussie corporates have jumped in. Heavy bouts of capital raising have shored up many companies' purchasing power. A share placement even directly financed at least one hostile takeover this year. "Instead of M&A, you better call it 'mergers and disposals'," quips one lawyer, referring to the ruthlessly popular take-control transactions.

Australia's neighbours have of course also spied opportunity in the country. "Japanese and Chinese acquirers have been prowling Australia looking for resources and other acquisition opportunities," says one lawyer. But another counters: "The only reason foreign investment sticks out is that nothing else is happening." European and US players have if anything been vendors - liquidating assets to repatriate cash where possible to shore up their home bases.

Rio Tinto's about-face from a government-sanctioned $19.5 billion deal with China's state-owned Aluminium Corporation concerning a rights issue joint venture with former aggressor and competitor BHP Billiton has shaken up Australia's M&A market again. BHP Billiton's $58 billion tie-up with the former takeover target is the region's biggest M&A transaction yet, but is also a potential setback for foreign direct investment in the resources-rich country if it discourages other Chinese firms from investing in the country.

The global financial crisis has the Australian project finance market in a bottleneck. Social infrastructure development under public-private partnerships (PPPs) dominated Australian project finance activity over the past year....

The global financial crisis has the Australian project finance market in a bottleneck. Social infrastructure development under public-private partnerships (PPPs) dominated Australian project finance activity over the past year. However, energy-sector initiatives, in particular liquefied natural gas (LNG), proved resilient to the worst of the downturn, allowing several projects in the resources and energy sector to power through the tight markets thanks to alternative funding.

For now, most new lending deals have been stymied by the paucity of debt funding, as financial markets in Australia are as liquidity-starved as elsewhere. In the meantime, business is looking to new directions for equity investment, including government partnership and overseas sources, with China being a major player.

In October 2008, the government increased its more than A$2 billion ($1.64 billion) commitment to infrastructure investment initiatives by an additional A$76 billion. The coming years will see those funds, in addition to state-driven programmes, help develop roads, railways, ports and high-speed broadband facilities across the country.

Innovative structures, such as the supported debt model financing used successfully to cut costs and complete the south east Queensland Schools PPP, may take the mid-size PPP market in new directions. But a wealth of large-scale projects on the table means participation from the private sector will become increasingly important as the Australian project finance market meets the challenges ahead.

As the global financial crisis gained momentum, Australian restructuring and insolvency practitioners started to get busy on a considerable amount of corporate rescue work. Firms report a vast increase in activity in the pipeline, with a lot of legal assistance behind the scenes in informal restructurings and workouts....

As the global financial crisis gained momentum, Australian restructuring and insolvency practitioners started to get busy on a considerable amount of corporate rescue work. Firms report a vast increase in activity in the pipeline, with a lot of legal assistance behind the scenes in informal restructurings and workouts. There has been an uptick in the volume of formal appointments over the past six months - Allco Finance Group, ABC Learning and Octavia among the collapsed.

However insolvencies have been thinner on the ground than expected, with more going to restructuring and workouts, and employing less traditional methods like debt and equity swaps. Banks are still nursing distressed creditorships to avoid formal insolvency because of the worry of finding buyers for assets.

This is largely down to the work of lawyers, banks and governments, who have been carefully co-ordinating the unfolding of the crisis to avoid a deluge of formal appointments. Regardless, R&I specialists will be in high demand for some time. "Collapses will inevitably increase and, all efforts to manage prices notwithstanding, it's going to get uglier before gets better," says one partner.