SYDNEY – Bathla Group, the insolvent Australian builder that has shaken the nation’s real estate and private credit markets, secured stopgap funding to stay afloat for a couple of weeks as it rushes to make headway repaying creditors owed A$3.4 billion (S$3.1 billion).
The company’s representative, the administrator Teneo, agreed to the emergency funding with five lenders, it said in a statement on Sept 7, without specifying the amount or identifying the creditors.
The financing is about A$4 million, a person familiar with the matter said, an amount that was discussed with several private lenders last week. Teneo declined to comment on the size of the deal.
The crisis at Bathla is spotlighting broader risks that Australia’s regulator had warned about in private lending, particularly in the real estate sector.
After the nation’s central bank raised interest rates three times since February, it is also adding to concerns about the property market at time when the government is pursuing a five-year supply target of 1.2 million units by June 2029.
The collapse of Bathla will have significant impacts on the economy just as sliding home prices could curb consumer spending, according to Tim Church, Morgan Stanley’s investment banking chief in Australia.
“It is the hammer blow,” Church said at the Australian Financial Review Property Summit in Sydney. The knock-on effects “will be significant”.
The emergency funding for Bathla will provide support to continue construction on projects associated with participating lenders, according to the statement on Sept 7. It would enable Bathla to maintain limited operations for two weeks, while Teneo works with the broader lender group to secure longer-term funding, administrator Stephen Longley said in the statement.
Construction on other projects will be suspended on Sept 7, resulting in about 213 staff stopping work as the administrators seek a broader rescue package, according to the statement. Final documentation for the stopgap deal is expected to be completed later on Sept 7, it said.
“The collapse of Bathla Group, a developer with a sizable housing pipeline in Sydney, risks putting the government’s” target further out of reach, Patrick Wong and Yan Chi John Wong, analysts at Bloomberg Intelligence wrote.
“The increasingly uncertain outlook amid a possible fourth rate hike later this year could keep homebuyers on the sidelines,” which could send sales lower at other major developers as well, they said.
Bathla has some A$130 million in debt from unsecured creditors, while secured lenders represent A$3.1 billion, according to slides seen by Bloomberg News during a meeting of Bathla creditors on Sept 4 with Teneo.
“Significant work remains to secure the funding required to progress and ultimately complete all projects currently under construction,” Longley said in the statement on Sept 7.
Private credit lenders on Sept 7 signalled they were continuing to monitor the industry as the fallout from the Bathla collapse deepened.
Victoria Hardie, group chief operating officer at HMC Capital, said her firm declined on numerous occasions in recent years to invest in Bathla because it did not meet risk management requirements, citing the “sheer amount of leverage”.
“It’s unique in terms of quantum,” Hardie said at the Australian Financial Review Property Summit on Sept 7. “I’m not expecting that we will see another Bathla.”
Qualitas co-founder Andrew Schwartz, who also has not invested in Bathla, recommends that it is prudent to stay vigilant.
“I’d be surprised if there wasn’t” another Bathla-type situation, though there is currently no specific name of concern, he said.
Simone Constant, a commissioner for the Australian Securities and Investments Commission (ASIC), described the “extraordinary complexity” of the Bathla Group, speaking at a parliamentary hearing in Sydney on Sept 4.
Constant said the regulator was concerned there may be retail investors among the private credit lenders backing the company.
ASIC is working with Bathla and its administrators “to get to the bottom of where these funds have gone”, Constant said, referring to the debt linked to the developer and it is engaging with Australia’s financial crimes agency Austrac on the topic. Bloomberg
