australian-debt-dilemma

Australian debt dilemma

An Australian court case could have a revolutionary effect on the local debt market, according to managing director for Standard & Poor's in Australia and New Zealand, Christopher Dalton.
International lenders and investors have always viewed Australia favourably in terms of the rights of creditors and shareholders. But this perception may change with a landmark 6-1 majority High Court decision handed down recently in relation to failed mining giant, Sons of Gwalia. The ruling sets a precedent for shareholders' claims, in certain circumstances, to be elevated to the status of ordinary creditors in a liquidation of a company, ranking them alongside unsecured financers.

In the view of Standard Poor's, this decision diminishes the clarity between the rights of debt and equity holders in the winding up of a company and is a negative development for Australia's financial and capital markets, whose development has historically...
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