By Christine Chen and Scott Murdoch
SYDNEY, Sept 30 (Reuters) – Metrics Credit Partners, one of Australia’s biggest private credit firms, has frozen investor redemptions from some funds and delayed the release of financial reports, in the latest sign of stress in the non-bank lending sector.
Metrics, which manages around A$40 billion ($28 billion), said on Wednesday that its auditor KPMG would not sign off on full-year accounts for three listed funds before a September 30 lodgement deadline.
The three funds — the Metrics Real Estate Multi-Strategy Fund, Metrics Income Opportunities Trust and Metrics Master Income Trust — have been suspended from trading on the stock exchange since Monday after Metrics disclosed it had written down their asset values.
Sentiment in Australia towards private credit has become fragile following the collapse of property developer Bathla Group, which owed A$3 billion to some 40 lenders when it entered administration in August.
The majority of those lenders were private credit firms, some of which have also since suspended redemptions.
Metrics said KPMG disagreed with assumptions used in their preliminary financial reports, including how fair value was calculated for unlisted commercial real estate equity investments.
It said earlier this week that it had no exposure to Bathla.
Metrics said redemptions of units in its unlisted underlying funds that feed into the listed vehicles “have now been suspended temporarily.”
The listed funds will remain suspended from trade until audited financial reports are submitted, it added.
REGULATOR CLOSELY MONITORING THE SECTOR
The Australian Securities and Investments Commission said it was closely monitoring developments across the country’s private credit sector in light of recent market upheaval.
“Where redemption requests are restricted or deferred, firms should ensure decisions are made in the best interests of investors,” a spokesperson said, without referring to specific companies and adding that exiting and remaining investors should be treated fairly.
The corporate regulator warned last week of unrealistic valuations and poor governance practices in the private credit industry, and said firms that failed to meet its standards should prepare for enforcement action.
Australia’s private credit market has expanded rapidly and is heavily exposed to the property market, which is in a downturn due to interest rate hikes and housing tax changes.
Perpetual, which is the responsible entity for the Metrics Master Income Trust and Metrics Income Opportunities Trust, also said on Wednesday that distribution reinvestment plans for the two funds would be suspended. That means investors cannot reinvest their dividends to buy more units in the trusts.
“Having regard to current market circumstances and the matters disclosed in previous announcements for the fund … the temporary suspension is in the best interests of unitholders of the fund as a whole,” Perpetual said.
Ratings agency S&P Global said it had placed four separate wholesale Metrics funds that it rated on a “credit watch”, which means it will monitor any action taken by Metrics across its portfolio.
($1 = 1.4349 Australian dollars)
(Reporting by Christine Chen and Scott Murdoch in Sydney; Additional reporting by Anjali Singh in Bengaluru; Editing by Edwina Gibbs)
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