When Australian property developer Bathla Group collapsed in late August with more than A$3.5bn (€2.1bn) in liabilities, much of it owed to private credit lenders, it sent shockwaves through the country’s A$200bn-plus private credit market. The failure comes as concerns intensify globally over vulnerabilities in the rapidly growing and relatively opaque private credit sector.
Bathla is the third – and the largest – Australian corporate failure involving substantial private debt in recent months. Public Hospitality Group and ACS Port Logistics have succumbed under the weight of debt, borrowed from non-bank lenders. In recent weeks, several private credit managers have also restricted redemptions from funds as they seek to protect portfolios from potential contagion.
Hours after the Bathla collapse, Australian Securities and Investments Commission (ASIC) chair Sarah Court warned that private credit was facing its first “real test”. She told a Committee for Economic Development of Australia lunch: “Unfortunately, what we’re seeing at the moment - and it’s early days and no doubt more information will come out in the weeks and months to come - is the first significant cracks.”
The question now confronting a sector that has expanded more than sixfold in a decade is whether Bathla represents problems peculiar to a highly leveraged property developer, or exposes broader weaknesses created during years of extraordinarily rapid growth.
Founded in 1997, Bathla grew rapidly with funding from some of Australia’s largest non-bank lenders. The group has been developing thousands of homes across Sydney, Melbourne and regional New South Wales, with a large pipeline of future apartment projects. Its main company, Universal Property Group, has debts exceeding A$3.2bn, while another Bathla entity, Raj & Jai Construction, owed around A$304m as of June last year. Administrators have estimated that about A$3.3bn is owed to creditors, a figure that does not include deposits paid by thousands of buyers across Bathla’s residential projects.
Its lenders include several Australian private credit firms as well as Hong Kong-based alternative investment manager PAG and La Trobe Financial, majority-owned by Brookfield. At least one lender, Centuria Bass, had moved before the collapse to strengthen controls around its exposure to the developer as concerns emerged late last year. As a result, Centuria Bass chief executive officer David Gibbin has played down the potential impact of the administration on its business.
Bathla’s collapse comes after extraordinary growth in Australian private credit as non-bank lenders have moved into areas vacated by traditional banks. Australia’s private debt market has grown more than A$224bn in assets under management, according to Alvarez & Marsal’s (A&M) 2025 Australian Private Debt Market Review. A decade ago, it was just A$35bn.
Commercial real estate has been a major beneficiary. A&M estimates A$92 billion is allocated to commercial real estate lending, accounting for around 18% of the domestic market. Residential construction has become particularly important. The Reserve Bank of Australia says it accounted for more than 40% of private credit lending in 2025.
More than 50 private credit funds have been launched in Australia, with many targeting returns of between 9% and 11% as investors search for higher yields. The growth has attracted some of the world’s largest alternative asset managers. Apollo Global Management, Blackstone and Ares Management have invested in Australian private credit, while Singapore’s CapitaLand acquired Melbourne-based lender Wingate. Sovereign wealth and pension funds, including GIC, APG and ADIA, have also been drawn to the sector.
Australian superannuation funds are increasing their exposure. Industry estimates put their private credit allocations at around A$30bn to A$35.5bn, although the asset class remains relatively small compared with their overall portfolios. A&M estimates super funds accounted for around 5% of the Australian private debt market in the last financial year. But allocations are growing. AustralianSuper, for example, has announced plans to double its private credit exposure to A$20 billion over the next four years. The rapid expansion has attracted increasing regulatory scrutiny.
ASIC’s 2025 review of private credit called for improved practices in areas including valuation, liquidity, conflicts of interest and transparency. The Financial Services Council, an industry body, has since introduced standards covering governance, valuations, leverage, liquidity, fees and investor disclosure, together with additional credit-risk requirements for private credit managers, requiring independent valuation policies, clearer risk and fee disclosure and liquidity arrangements aligned with the underlying assets held by funds.
The prevailing view seems to be that Bathla does not necessarily signal a broader crisis. Lenders believe that individual borrower failures are an inevitable feature of credit markets and that well-structured loans, security over underlying assets and diversified portfolios should contain losses. That proposition is now being tested.
Bathla may ultimately prove to be an unusually large but isolated corporate failure rather than a canary in the coal mine. But with A$224bn now invested in Australian private debt – and with property development accounting for a significant share of the lending – its collapse has ensured that regulators and investors will be watching closely for the next crack.
