Metrics Credit Partners Suspends Trading on Three Funds, Cuts Asset Values by A$168M
Australian private credit firm Metrics Credit Partners has suspended trading of three listed funds after KPMG flagged discrepancies in preliminary financial reports. The funds' net asset values have been reduced by a total of A$168 million, with the Real Estate Multi-Strategy Fund taking a A$47 mill
One of Australia’s largest private credit providers, Metrics Credit Partners, has suspended trading of three of its listed vehicles and reduced the value of the funds’ assets by about A$168 million ($117.4 million) after auditors pointed to discrepancies between preliminary financial reports and audited results.
Metrics asked the Australian Securities Exchange to suspend trading of the Metrics Real Estate Multi-Strategy Fund, Metrics Master Income Trust, and the Metrics Income Opportunities Trust before the market opened on Monday. Based on information provided by auditor KPMG, “certain amounts and information in the audited annual financial report will differ from those contained in the preliminary final report” for the three funds, the company said in filings to the ASX on Monday. The three funds reported preliminary full-year earnings on 31 August. The company said their audited financial reports will be lodged on Wednesday.
The reductions in net asset values include a markdown of about A$47 million, to A$337 million, for the Real Estate Multi-Strategy Fund; A$72 million to A$644 million for the Metrics Income Opportunities Trust; and A$49 million to A$2.4 billion for the Metrics Master Income Trust, according to Mingtiandi calculations based on the ASX filings. The net tangible asset backing of the Real Estate Multi-Strategy Fund as of 30 June is expected to be A$2.22 per stapled unit, as opposed to A$2.53 per stapled unit as disclosed in the preliminary report in August, representing a reduction of 31 Australian cents per stapled unit, or 12.16 per cent of net tangible assets, according to the filing. The markdown for the Real Estate Multi-Strategy Fund was mostly attributable to a reduction in the fair value of unlisted commercial real estate equity investments, according to the filing, which didn’t identify specific assets.
The company said that, in finalising the audited results, “greater weight was given to downside scenarios and less favourable potential outcomes than in the preliminary final report”. “The resulting provisions reflect a more risk-weighted assessment of potential outcomes, having regard to prevailing interest-rate and macro-economic conditions and heightened regulatory expectations as applied to specific assets and the portfolio generally,” according to the statement. “The adjustments do not represent realised losses or a conclusion that the Metrics’ strategies, forecast cash flows or business plans will not be achieved.” A spokesperson for Sydney-based Metrics declined to provide further comment, and referred Mingtiandi to the ASX filings.
Concern about private credit lending to the property sector has intensified since the high profile collapse of New South Wales property developer Bathla, which entered voluntary administration late last month with about A$3.4 billion in total preliminary liabilities and debt. Metrics said it has no exposure to Bathla, according to a Reuters report on Monday. The Australian Securities and Investments Commission, the nation’s corporate regulator, has intensified its scrutiny of the country’s A$200 billion private credit market because of concern that lax governance standards could pose a risk for the broader economy. ASIC commissioner Simone Constant, in a 22 September speech, warned that real estate lending is particularly vulnerable, and accounts for as much as 60 per cent of all private credit loans in the country. “Property development and construction lending is vulnerable to a wide range of factors – inflation, escalation in costs, project delays, interest rate rises, refinancing conditions, and unrealistic asset valuations,” Constant said. “But it’s not property that’s the weakest link – it’s poor practices.”
Metrics suspended trading on the funds as the company works with Sydney-based Billbergia to develop several mixed-use projects in Sydney, including the A$3.5 billion Castlereagh Place between Castlereagh and Pitt Street in the city centre. The partners are developing a pair of 82-storey towers comprising 607 luxury residences above an eight-level podium housing a 209-room luxury hotel on the 6,000-square-metre (64,583-square-foot) site. Metrics and Billbergia are also planning Chatswood Grand Residences, an A$1.3 billion residential and commercial complex in Chatswood in Sydney’s north.
