The heat has gone out of the distressed debt market in Australia, forcing private debt investors to turn their attention to other opportunities, a private equity conference in Sydney has been told. Deal flow would come from a growing appetite for mezzanine debt, the refinancing needs of mining and mining services companies, and from parts of the SME market where banks were reducing their exposure.Following the financial crisis, a number of regional and foreign banks, including Suncorp, Lloyds, GE Capital and RHG, sold large commercial loan portfolios.A director of KKR Capital Markets, Diane Raposio, said KKR's special situations fund had moved out of the distressed market.Raposio, who was speaking at the Asian Venture Capital Journal's private equity conference in Sydney last week, said the fund was looking for opportunities in parts of the small and medium business sector where banks were reducing their exposure.Goldman Sachs managing director Genevieve Gregor told the conference European and regional banks had sold their distressed debt."Four years ago, when I spoke to a banker about a debt sale he thought I was trying to take his job. It is now an accepted part of the market and there will always be distressed opportunities," Gregor said."It is in the toolkit. But it is hard to say how big the opportunity is now."Gregor said her team was looking at the mining sector. "Small mining stock prices have take a hit and it is hard for them to get capital. We have had some success there," she said. Goldman Sachs was also working with private equity funds that wanted a debt investor in their deals, she added.Both speakers agreed that banks were still taking a conservative approach to business lending. This gave private debt funds an opportunity to introduce more exotic structures, such as mezzanine debt and "unitranche" loans, which had mezzanine and senior debt packaged in one product.