Australia – Year in Review & Outlook

3 minute read

2025 Highlights

The first half of the year was subdued amid tariff-related uncertainty, but activity accelerated in the second half, particularly in Q4. We closed two transactions on December 23rd, which is unusual for the Australian market; it typically shuts down by mid‑December given it’s the middle of the summer and typical financial year-ends aren’t until 30 June.

Throughout the year, we proactively engaged with middle market companies that were exploring the best approach to fund their growth initiatives as wellas those facing challenges due to evolving market conditions in the face of rising costs and subdued demand. We proactively worked with several borrowers to develop bespoke financing solutions that could cater to their long-term funding needs.  A notable example included refinancing a company's bank group with a new covenant package, positioning PGIM as a key partner in navigating lender negotiations. This option provided the company with the flexibility it needed to execute on its growth strategy through partnering with PGIM without worrying about the support of its lender group in the future as it now benefited from tenor and asmaller lender group to facilitate faster decision-making.

We also completed a new platform investment with a privately owned business that was originally seeking both a debt and equity solution where we established a financing option that solved both requirements. In addition, we provided an add‑on financing for an existing mezzanine borrower, providing senior and subordinated financing to support a transformative growth opportunity. Significant activity across the platform centered on growth capex, making it essential to align long‑term investments with long‑term capital to allow businesses sufficient runway to navigate potential unexpected challenges as they pursued growth initiatives.

Private Placements

Over the past decade, the Australian private placement market has contracted from 20–30 transactions annually to consistently less than 10 nowadays. This is largely because of unattractive pricing when swapping from US$ to AUD as well as the domestic medium-term note (MTN) market maturing and now serving more issuer needs both from a volume and tenor perspective. The latter is, in part, a result of Australia's mandatory superannuation retirement contributions, which have increased the demand for fixed-income products and underpinned increasing volumes that can be delivered within the MTN market.

As a result, most of our office’s activity is now bilateral. Our approach resonates with borrowers in need of tailored structuring, flexible terms, or a responsive long-term partner. For typical financing situations, the pricing for both the banks and local markets can be competitive, but our approach is well suited for growth-oriented borrowers who want to be more dynamic in their financing solutions while also ensuring that they have a partner able to support future initiatives.

The shelf product remained a major differentiator in 2025. Wecompleted five shelves, including renewals, which continued to give issuersefficient access to capital for refinancings, M&A, and growth capex.

In the broader private placement market, most activity came fromrepeat issuers. Large transactions still attract heavy investor interest,though overall market flow remained limited.

Pricing was tight due to rated issuers having the ability to issue in the domestic MTN market.  The unfavorable swap dynamics between USD and AUD which made issuance less attractive for much of last year has started to improve as we’ve come into 2026.

Direct Lending

Bank lenders continue to dominate the Australian Direct Lending market, with only about a quarter of lending coming from non‑banks with most of that activity focused on real estate. We target situations where banks are reluctant to finance because of sector preferences, overseas expansion ambitions, lack of PE involvement, or fatigue with existing borrowers, and offer solutions that enable management to stay focused on growth rather than bank negotiations.

One observation we’ve made is that, when listed companies are facing headwinds or report negative results, they often experience significant market pressure to raise equity at a dilutive price; this is particularly prevalent for small- and mid-cap companies. When we work with these management teams, we’re aiming to deal with these external pressures on both the debt and equity side and come up with financial solutions that may not have been readily apparent from a traditional financing standpoint.

Real Assets

Infrastructure activity remained steady but highly competitive. One major transaction in 2025 involved an oil and gas infrastructure company we had worked with in the previous year. Another potential deal involved a large regional airport, although ultimately this was priced too tightly for us. Many infrastructure issuers opted for the MTN market instead or continued to be served by banks who are willing to provide increasingly longer tenor

We’re actively encouraging middle market issuers to explore alternative structures, such as hold‑co or subordinated financings, that can support large capex programs while preserving credit ratings. These solutions can complement senior debt and help issuers maintain access to public markets while funding long‑term needs.

Outlook for 2026

Earlier this year, the Reserve Bank of Australia became the first major central bank to increase rates, a decision intended to combat persistent inflation. As companies continue to face tightening in profitability margins and cash flow being further impacted by potential rate rises, they will benefit from partnering with lenders capable of navigating higher-rate environments and offering long-term relationship driven stability.

While short‑term bank pricing remained attractive in 2025, we anticipate companies will increasingly value diversification, longer tenors, and responsiveness.

As we mark the 10-year anniversary of our Sydney office, our track record through multiple market cycles positions us well to continue supporting Australian companies through an unpredictable economic environment.