Can anyone in Australia and NZ share their experience with banks lending...

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July 20, 2023

by a professional from Massey University in Auckland, New Zealand

What are the current multiples banks in either Australia and New Zealand are currently looking to lend at and has anything changed since first quarter?

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Reply by a lender
from University of Technology Sydney in Sydney NSW, Australia
Gabe, bank lending appetite will differ depending on the industry and risk profile of the specific business. Generally a debt size of 2-3x EBITDA is considered, and for a new purchase you can 100% debt fund certain transactions if they fall within that total debt size limit, otherwise equity will be required.

Outside of the banking sector however there are funding options, particularly when debt size is over $2M, however their cost is higher, but you might still get the deal done or acquire that business and the higher financing costs are just part of the opportunity cost, and then you refinance it to a lower cost of capital later on.

One thing to keep in mind is interest rate cover (ICR) for any operating business, as that is being looked at much more closely as rates have increased a lot, so you would want to aim for >1.5x ICR if possible.
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Reply by a searcher
from University of Otago in Christchurch, New Zealand
Hi Gabe - I'm in the middle of acquisition financing at the moment for a deal in NZ. We have secured term sheets from a private debt fund, and also the Bank of New Zealand (BNZ). We had productive discussions with ANZ, but these did not result in an offer.

For context, our bank offer was for a 2.5x EBITDA loan, and has 'normal' covenants and reporting requirements. Our offer from private debt had a lot more cashflow flexibility but was similar in size.

The price of the debt is sitting around 6% margin on BKBM (5.75%)

My experience has been good both with private debt and also senior/traditional banks. But the banks in NZ are still highly relationship driven so getting in early and maintaining a good point of contact has been critical.

If you want to discuss in more detail then more than happy to help and make intros as necessary
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