October 20, 2023

Dissecting opportunity and distress in New Zealand


Senior members of Merricks Capital’s Private Credit and Investment Management teams were in Auckland this week for 35 meetings with borrowers, potential borrowers, capital allocators, real estate agents, banks and alternative capital providers. They gathered a range of insights and a positive outlook.

The Merricks Capital Partners Fund currently holds 13 out of 59 loans in NZ (36% of the NAV). Based on borrower projects coming to completion, we expect 5% of this exposure to be repaid over the next 3 months and 10% over the next six months.

With a weighted average IRR* across NZ investments of 13.0% and LVR of 61%, we estimate the premium for deploying into like-for-like senior secured loans in NZ rather than Australia is approximately 150-250bps. This highlights the attractiveness of the opportunity where downside asset price risk is mitigated by hard assets with a 35-40% equity buffer.

* The internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments

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