The rating agency placed four unlisted Metrics Credit Partners funds on CreditWatch negative, the flagship listed trust suspended its reinvestment plan, and a retail fund froze applications and withdrawals "until further notice."
The audit delay at Metrics Credit Partners now carries a deadline set by someone other than the auditor.
S&P Global Ratings on Sept. 30 placed four rated, unlisted Metrics funds on CreditWatch with negative implications: the Metrics Credit Partners Diversified Australian Senior Loan Fund, rated A-; the MCP Wholesale Investments Trust, rated BBB+; the MCP Real Estate Debt Fund, rated A-; and the MCP Secured Private Debt Fund II, rated A+.
S&P said it could affirm the ratings if audited financial statements are lodged by Oct. 28, and may lower them within 90 days if they are not. It added that a CreditWatch placement "is not necessarily a precursor to a ratings downgrade."
Three more steps
The rating action was one of three measures taken on the same day.
The Metrics Master Income Trust, the largest of the three listed trusts suspended from the ASX on Sept. 28, suspended its distribution reinvestment plan with immediate effect. The Metrics Income Opportunities Trust did the same.
Equity Trustees, the responsible entity for the unlisted Metrics Direct Income Fund, suspended all applications and redemptions "until further notice." That makes it a fourth vehicle frozen alongside the three listed trusts and the wholesale funds already gated.
The firm, which manages about A$40 billion, had earlier frozen redemptions at about A$9.3 billion of unlisted wholesale funds after its auditor, KPMG, said it could not deliver an opinion on time. The listed trusts' net asset values were revised down by as much as 12.16%.
The central bank's view
The Reserve Bank of Australia addressed private credit in its Financial Stability Review, released Thursday. It said the sector does not pose "a system-wide financial stability risk at present," while flagging the "opaque practices of some private credit funds." The review did not name Metrics.
What the deadline does
Before Wednesday, the only clock on Metrics was the audit itself. S&P's action adds a dated consequence. If the accounts are not lodged by Oct. 28, the ratings on four funds are exposed to a cut, and investors whose mandates depend on those ratings could be forced to reassess their holdings.
The reinvestment suspension matters for a different reason. A distribution reinvestment plan issues new units at a price tied to net asset value. With the value under review, suspending the plan avoids issuing units at a price the audit may change.
Two readings
One reading is that the steps are orderly housekeeping while the audit is completed. Each one prevents new money from entering or leaving at a price that may be revised, and S&P has left room to affirm.
A second reading is that the freeze is still spreading. A fourth fund has gated, a rating agency has attached a deadline, and the regulator's language about opaque practices lands on the week one of the country's largest private lenders cannot produce audited numbers.
Oct. 28
Lodgment of the audited report is the event that resolves most of this. Whether it arrives before S&P's Oct. 28 reference date, and whether its figures match the revised net asset values, will decide the ratings, the reopening of redemptions and where the listed trusts trade when they resume.