Australia's A$40B Metrics Credit Partners Freezes Redemptions as KPMG Refuses to Sign Off Accounts

Metrics Credit Partners, one of Australia's largest private credit managers, froze investor redemptions at its underlying funds on Wednesday and delayed its audited accounts after KPMG refused to sign off the books of three listed vehicles. The escalation turns a two-day trading suspension into a liquidity freeze at a firm overseeing about A$40 billion, or roughly US$28 billion.

The dispute is about what the assets are worth. In separate ASX filings on Monday, Metrics said KPMG had made "different decisions" on inputs and probability weightings from those used to prepare the preliminary reports. The changes cut net tangible asset values by 12.16 percent at the Real Estate Multi-Strategy Fund, 10.08 percent at the Income Opportunities Trust and 1.99 percent at the Master Income Trust. The audit process also produced higher provisions for potential losses on loan exposures across all three funds.

The deepest cut fell on the Real Estate Multi-Strategy Fund, where the unit value dropped to A$2.22 from A$2.53, mostly because of a reduced fair value on unlisted commercial real estate equity investments. The fund last traded at A$1.68, a steep discount suggesting the market had already started pricing in trouble. Metrics said that "in finalising the audited results, greater weight was given to downside scenarios and less favourable potential outcomes," reflecting interest-rate and macroeconomic conditions and heightened regulatory expectations. The firm stressed that the adjustments do not represent realised losses or a conclusion that its strategies, forecast cash flows or business plans will not be achieved.

Wednesday's announcement widens the damage beyond the listed vehicles. Redemptions of units in the unlisted funds that feed into the three listed trusts "have now been suspended temporarily," Metrics said, and the listed funds will remain halted until audited financial reports are lodged. That leaves the firm missing its September 30 lodgement deadline with no firm date for the accounts or for redemptions reopening.

The freeze arrives as Australia's corporate regulator tightens its grip on the country's A$200 billion private credit market. The regulator warned last week of unrealistic valuations and poor governance practices and said firms that failed its standards should prepare for enforcement action. In a Sept. 22 speech, commissioner Simone Constant said real estate lending was "particularly vulnerable" and accounted for as much as 60 percent of all private credit loans. The warning followed the collapse of developer Bathla Group, which owed A$3 billion to some 40 lenders when it entered administration in August. Metrics says it has no exposure to Bathla. The broader backdrop is unforgiving: Australia's private credit boom is heavily exposed to property, and the property market is in a downturn driven by interest-rate hikes and housing tax changes.