Ted Dow of DIF Capital Partners

Dow says that Australia's mezzanine market is not as prevalent as other global markets because "it's more difficult for banks to do it; it doesn't sit on their balance sheet well and they get penalized quite heavily from a Basel capital adequacy point of view," thus blocking off a natural avenue of capital for those who seek mezzanine. Yet, the gap in the market could be a draw for international players to get involved, with "a lot of European names here already, there are some American names coming down here, but as a prelude of that is what is going to have to happen is that the Australian mezzanine debt market is going to have to internationalize."

Dow adds that the IPO market should be a means to jumpstart the industry, but there is not robust activity coming from traditional mezzanine lenders because of recent times.

"Most of the activity that we're seeing is on the refinancing front, the recapitalization front, and, in fact, a lot of our competition right now is the IPO market where you might have a company that has too much senior debt and they have a senior debt lender who has lost patience with them," he says. "Where do they go get capital? Well the first answer should be mezzanine debt, but mezzanine debt is probably becoming a little bit more secretive now, or at least the providers of it have become a little bit less obvious, because while it was always a small industry, there are a number of players who have fallen by the wayside and are no longer investing in the market."

Instead, Dow says that most activity over the next two years will come from refinancings and from corporates who look to raise money from public markets to pay back their financers.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• People
• Mezzanine
• Australasia