Almost half of the participants at the recent Grant Thornton Bankers’ Boot Camp national series nominated the health and aged care sector as having the strongest prospects for future lending growth.
The series — with major events held in Brisbane, Sydney, Melbourne and Perth — brought together almost 400 senior bankers from all major Australian financial institutions.
When asked which industry had the best lending growth potential, 45 per cent nominated health and aged care — ahead of food and agribusiness, education, advanced manufacturing, science and medical, energy and resources, and a number of other sectors.
Matt Byrnes — Grant Thornton’s National Head of Restructuring Advisory — said the results highlighted the opportunities arising from the ongoing transition of the Australian economy.
“Demographics are driving enormous demand in the health and aged care space,” he said.
“We’re living longer, and that means there is huge demand for services supporting older Australians.”
The lending opportunities from the health and aged care industry are broad and infinite for banks, according to Darrell Price – Grant Thornton’s National Head of Health & Aged Care – with knock-on opportunities from players also invested in the sector – like private equity and supply chain specialists generally.
“Those seeking financing are looking to fund a range of different opportunities — home-care services, new aged-care and retirement construction projects, medical centres, and of course all the feasibility studies needed to support these projects,” said Price.
“But there are also opportunities to come from related players – like investments from the private equity sector who see real opportunity from the health and aged care industry, not to mention from the complex supply chain servicing this industry and its participants.”
Sentiment was most bullish amongst bankers in Perth, with 54 percent nominating health and aged care as the top lending opportunity.
Food and agribusiness came in second, with 24 per cent of respondents nominating the sector as their top choice for future lending prospects.
No other sector registered more than 10 per cent, suggesting more limited short to medium term growth prospects for lending to many sectors in the Australian economy.
Byrnes said there was also significant interest in the impact of the newly introduced reforms to Safe Harbour legislation.
“By and large, the safe harbour legislation was seen as a positive step towards providing companies in distress — and their directors — with an opportunity to preserve value in business, however there was a view that the reforms don’t go far enough,” he said.
“The impact of the changes will likely vary between small to medium, and larger companies.
“Directors of small to medium businesses are likely to continue to ‘run the gauntlet’ by continuing to trade through the zone of insolvency – but there is a real risk that they will fail to ensure ongoing compliance with tax obligations, payment of employee entitlements like superannuation, and proper maintenance of books and records.
“Safe harbour protection will not be available in those situations. Directors should seek specialist advice when planning a restructure to ensure they take the appropriate steps and can access the safe harbour protections.”
New changes to ipso facto laws due to come into law by 30 June 2018 or earlier — whereby contracts and agreements cannot be terminated by reason only of insolvency —were also discussed.
“Support for the reforms to address ipso facto was strong, however, there was general disappointment from our expert panellists in all states that the proposed changes are not retrospective and will only apply to those contracts and agreements entered into after the commencement date,” Byrnes said.
“This will likely inhibit the intended benefits of the reforms and create practical challenges for restructuring practitioners, directors and their advisors when planning and navigating a corporate restructure. A missed opportunity in our view.”
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