Documentation gets you to the table. Position decides what you take home.

This week I convened a Covenant Exchange roundtable in Sydney. Participants from private credit, super fund, family office, asset management, and legal shared views on documentation risk, and the conversation ranged across jurisdictions and case studies. The repeating theme, which we’ve seen at each of these events, was that documentation matters, and so does everything that sits on top of it.

The most striking case study came from a high-profile Chapter 11 of an Australian-headquartered healthcare business with US operations. Lenders who thought they were lending to an Australian company with US assets ended up in a Chapter 11 process they had not modeled, governed by a roll-up structure many had never experienced. New money came in at the top of the stack and existing debt that participated in the roll-up moved up with it - everyone else was left behind.

One attendee shared their fund's experience. They were in the deal for years and when the workout began they were not the largest holder, but they got onto the ad hoc group early through long-standing relationships with funds leading the process. They took the roll-up, took an equity piece, and have now recovered above par. Other Australian lenders called them looking for information. Some had already sold at distressed prices. CLO holders had been forced out by ratings-driven concentration limits before the recovery story even started. The lesson: Reading the documents told you what was possible, but knowing the right people told you what was actually going to happen.

The conversation shifted to cooperation agreements. In the US and Europe these have become one of the strongest tools lenders have, and the sponsors know it. Patrick Drahi is suing co-op lenders for anti-competitive behavior in connection with the Optimum LME. Selecta is another active case. 

The tool is being attacked on another front as well - sponsors are inserting anti-coop provisions into credit agreements. Some are drafted broadly enough that, on one reading, lenders coordinating to call an event of default would be in violation. I am hoping 2026 brings final decisions on the merits rather than another round of settlements.

What was unique about the Sydney conversation was the structural counterweight Australia still has. Banks tend to hold senior secured deals from cradle to grave. White lists, a smaller market, and APRA oversight reinforce a culture where deteriorating terms get pushed back are less likely to take hold. ASIC and APRA are now scrutinizing retail-facing private credit funds on governance, mark-to-market practices, and the use of waivers to keep defaults off balance sheets. Regulators will make public examples of those falling afoul of these warnings.

But the global money is here, and global terms travel with it. One participant predicted that the first big Australian LME may come from a founder-owned business. As Europe learned the hard way, when permanent reputational damage is the cost of staying alive, founders make different choices than fund managers do.

For the allocators in the room, the conclusion of the conversation was that knowing your private credit manager has documentation discipline is not the same as knowing they will be on the right side of the table when the workout starts. Ask about the protective terms they require, and ask how they got onto the last ad hoc group they were part of. The answer will tell you more than the IM ever will.