Insolvent Australian developer Bathla gets stopgap funding as debt crisis lingers

[SYDNEY] Bathla Group, the insolvent Australian builder that’s 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 (US$2.5 billion). 

The company’s representative, the administrator Teneo, agreed to the emergency funding with five lenders, it said in a statement on Monday (Sep 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 funding will provide support to continue construction on projects associated with participating lenders, according to the statement. 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 Monday, 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 Monday, it said. 

The crisis at Bathla is spotlighting the risks that the nation’s regulator had warned about in private lending particularly in the real estate sector.

After Australia’s central bank raised interest rates three times since February, it’s also adding to concerns more broadly 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 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.

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For Bathla, unsecured creditors have extended debt of A$130 million, while secured lenders represent A$3.1 billion, according to slides seen by Bloomberg News during a meeting of Bathla creditors on Friday 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 Monday.

Simone Constant, a commissioner for the Australian Securities and Investments Commission (Asic), described the “extraordinary complexity” of the Bathla Group, speaking at a Friday parliamentary hearing in Sydney.

Constant added that 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