ICLG Lending & Secured Finance 2018: Guide to Australian, Hong Kong and PRC law (Australia)

• Citation: jd0011
• Published date: 03 May 2018
• Date: 03 May 2018
• Subject Matter: Banking & Finance

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156 ICLG TO: LENDING & SECURED FINANCE 2018

© Published and reproduced with kind permission by Global Legal Group Ltd, London

Chapter 28

King & Wood Mallesons

Yuen-Yee Cho

Elizabeth Hundt Russell

Australia

2 Guarantees

2.1 Can a company guarantee borrowings of one or more

other members of its corporate group (see below for

questionsrelatingtofraudulenttransfer/nancial

assistance)?

Yes. However, corporate benet and other requirements need to be

considered. These issues are outlined below.

2.2 Are there enforceability or other concerns (such as

director liability) if only a disproportionately small (or

no)benettotheguaranteeing/securingcompanycan

be shown?

The directors of a company owe a duty to the company to act for

the benet of the company in its best interests, with due care and

diligence, in good faith and for a proper purpose. Directors must

also avoid any conict between a director’s duty to the company and

that director’s personal interest. Directors must comply with these

duties when resolving to give a guarantee.

In determining whether to grant a guarantee or provide security,

directors may consider both direct benets and indirect benets of

doing so. Indirect benets may include that the provision of the

guarantee is a requirement for the ongoing support of other members

of the corporate group where the support also indirectly benets the

company. While it is not sufcient that the guarantee benets the

corporate group as a whole, a director of a wholly owned subsidiary

may take into account the best interests of its holding company as

long as the constitution of the company permits it to do so and the

company is solvent at all relevant times.

A guarantee that does not commercially benet a company may

be voidable or, in a liquidation, the guarantee could be deemed an

uncommercial transaction or unfair preference. A breach of duties

by directors can result in civil and criminal penalties and personal

liability for directors.

2.3 Is lack of corporate power an issue?

An Australian company has all the powers of an individual. This

includes the power to give a guarantee. However those powers may

be limited by the company’s constitution.

1 Overview

1.1 Whatarethemaintrends/signicantdevelopmentsin

the lending markets in your jurisdiction?

2017 was a good year for borrowers – with bank funding costs down

and a scarcity of assets/names driving better pricing and terms for the

borrowers who came to market, together with the emergence of many

alternative sources of funding on competitive terms. These include

a strong demand from the Australian debt capital markets (medium

term notes) and US private placement markets for infrastructure

borrowers. Strong corporates such as Sydney Airport, AMP Group

and Ramsay continued to tap the syndicated loan markets.

On the more highly leveraged transactions, 2017 will be

remembered as the year in which unitranche nancings (such as

iNova, Laser Clinics and Novotech) and Australian law-governed

AUD-only Term Loan Bs (Camp Australia, Leap Legal/Infotrack

and Craveable Brands) really made a big impact. While traditional

senior/senior + holdco mezzanine leveraged loans continue to be

used (e.g. Icon Cancer Care), some of the larger sponsors are now

running dual-track nancing strategies, forcing banks providing

traditional syndicated loans to compete with unitranche nancings

provided by institutional lenders/debt funds.

1.2 Whataresomesignicantlendingtransactionsthat

have taken place in your jurisdiction in recent years?

■ Large corporate loans syndicated in the Asia-Pacic loan

markets included Sydney Airport on its A$1.4 billion

renancing – voted KangaNews’ syndicated loan deal of the

year 2017, Transurban Group’s A$1bn+ renancing and the

Port of Brisbane renancing.

■ The rst Australian law standalone covenant-lite AUD Term

Loan B facility for an Australian corporate, arranged by

Goldman Sachs and JPMorgan for leading tech companies

LEAP Legal Software and Infotrack and the senior and

mezzanine AUD Term Loan B facilities for the debt

recapitalisation of Craveable Brands.

■ Signicant acquisition nancings including Carlyle/PEP’s

iNova acquisition, QIC/Goldman Sachs PIA/Pagoda

Investment consortium’s acquisition of Icon Cancer Care and

KKR’s acquisition of Laser Clinics Australia.

KWM was involved on all the above transactions (including on the

vendor/bidder side).