Asian Venture Capital Journal | 08 Sep 2010 | 16:28
Mezzanine’s role in Australia’s financing sector has grown in light of the economic crisis because, not only has it acted as an alternative to taking on senior debt – as banks became more stringent in their lending – but also to equity itself, says Gary Stead, Co-Founder and Managing Director of Shearwater Capital.
Stead tells AVCJ that Australia's shifting financing landscape has landed mezzanine with new bedfellows that it wouldn't have had to compete with in times past. "The alternative used to be senior debt. So the private equity funds would say, ‘do we really need to do mezzanine? Not really, because the banks will go an extra turn. They'll go to 6x; we'll push them to 6 1/2x. We don't really need this expensive mezzanine,'" Stead says. "The banks of today say, ‘we're at 3x; we're at 3 1/2x, take it or leave it,' and the private equity fund is then talking about writing an equity check for 40-45%. Then our capital becomes an alternative to equity, not to senior debt, and as an alternative to equity, I think we're good. We're cheaper."
Stead additionally looks at the challenges private equity players face in Australia, and the avenues they still have available to them in terms of borrowing capital.
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The outlook for the Australasian market is positive as a record number of IPO exits have provided strong returns for investors and has proven that PE can outperform listed equities and compete with global divestment figures. Fundraising in terms of dollar value has been high but the number of PE funds successfully raising new commitments has declined as investors flock to the best in class.
This is an intriguing time for Australasian PE as the industry continues to mature. GPs must evolve, diversify and display skills to drive value in a low-growth environment and justify future commitments when competing on a global state by achieving world-class results from current deals and exits.
4-6 March 2015, The Westin, Sydney
The AVCJ Indonesia Forum is back for a fourth year! Mark your calendars now and join us on March 24th, 2015 in Jakarta at Indonesia's longest running, largest and most prestigious industry gathering.
The market is relatively optimistic as a new government that is viewed favourable to a balanced investment arena is introduced and we see an increase in deal activity. The hopes for a flourishing PE market amid the euphoria of 2012 has not yet been realised but the potential is still present and now may well be the time for the country to take off in its own right and increase its reputation as THE hot market in Southeast Asia.
24 March 2015, Grand Hyatt, Jakarta