Banks look for more lending help from Treasury

There is fresh talk of the Australian government co-investing in syndicated loans of Australian companies through a special purpose vehicle. Banks would invest alongside the government.

Columnist Andrew Cornell reported in the Financial Review there was discussion over an arrangement to invest in commercial property loans and also a separate arrangement to invest in corporate debt.

Versions of this idea have been kicking around bank and government circles for a month or two and may be gaining increasing support.

The current talk may extend to the buy-out, by any special purpose vehicle, of some current loans from select foreign banks to Australian corporate borrowers. The AFR reported talk of foreign bank investment in syndicated loans being bought out at discounts of between 10 per cent and 20 per cent.

The government, through the Australian Office of Financial Management, is already investing directly in the senior debt of pools of home loans. The government is also investing in subordinated debt of vehicle loans in order to ease the transition for car dealers of the withdrawal from the market of GE Money from motor finance and also GMAC.