Hedge funds fill funding gap for Australian companies

Hedge funds are boosting investments in Australian companies, filling a “funding gap” left by a reduction in bank lending, according to David Heathcote, head of KPMG International’s debt-advisory practice in Australia.

“There is significant volume available, particularly from offshore funds which have a global pool of capital,” Heathcote said in a telephone interview from Sydney today, declining to name any companies that received money from hedge funds. “Provided the return is right, these funds will actively look at investing into Australia,” he said.

Australian companies have $200 billion of syndicated loans due to mature in the next four years, according to data compiled by KPMG. Loans and advances made by foreign banks in Australia decreased by about 10 percent between December and August amid the global credit squeeze, helping create a funding shortfall that companies must plug from alternative sources, the advisory company said in an e-mailed report today.

Australian non-financial companies sold A$2.39 billion ($2.2 billion) of bonds in the nine months to September and face an “onerous” task refinancing their maturing debt, Fitch Ratings said an Oct. 7 report. Hedge fund assets may top the previous $2 trillion high by the end of next year as double- digit average returns lure investors, Barry Bausano, Deutsche Bank AG’s global co-head of prime finance, forecast this month.
Hedge funds are focusing on companies needing between A$25 million and A$75 million and may be able to fill a funding void borrowers can’t meet with bank loans or share sales, according to Heathcote.

“Companies would be better prepared by investigating all options and not necessarily going down the typically more expensive equity route,” he said.

Australian businesses raised A$120 billion from equity sales between July 2008 and September 2009, Belinda Gibson, commissioner at the nation’s securities regulator, said at a conference yesterday.