Revolution sounds warning on Australia’s shift to covenant-lite private credit deals
Private equity giants KKR and Brookfield are pushing deeper into private credit, bringing highly leveraged, flexible deals that offer fewer protections for lenders.
Large international private equity firms expanding into private credit are bringing covenant-lite deals to Australia. Revolution Asset Management is among the managers steering clear of such loans.
Revolution managing director and chief investment officer Bob Sahota said private credit is now dwarfing the equity arms at firms such as KKR, Blackstone, Ares Management and Brookfield Asset Management, which were once focused almost exclusively on equities.
“It’s not a bad thing as there’s a requirement for financing and there’s competition for debt. But the issue is when you’ve raised so much money what suffers is a decline in protections,” Sahota told Capital Brief.
Traditionally, debt deals are structured to protect lenders. Sahota said the US has seen a rise in covenant-lite transactions with high leverage and highly flexible documentation — a trend that is now filtering into Australia.
