Private Credit and SMSFs: What the Bathla and Adgemis Failures Mean for Investors
Private credit - lending that happens outside the banking system - has grown popular in Australia as a high-yield alternative to shares, property and traditional fixed income, but the collapses of developer Bathla (around $3.2 billion in liabilities) and hospitality figure Jon Adgemis (roughly $1.8 billion borrowed) show how risky these arrangements can be, especially when marketed under reassuring labels like "secured," "property-backed" or "fixed interest." ASIC has called this the sector's "first real test" and has already issued stop orders against several funds amid rising concern about retail and superannuation exposure. The law firm behind this piece, Financial Dispute Legal, argues that SMSF trustees who were advised into these products without proper regard for the actual risk may have grounds to pursue advisers, licensees or promoters for compensation, and is offering to help investors who've suffered losses explore options like an AFCA complaint.
Private credit has grown rapidly in Australia, often being promoted as an attractive alternative to shares, property and conventional fixed-interest investments. However, recent events involving property developer Bathla and the Adgemis hospitality interests demonstrate that high returns from private lending can involve substantial—and sometimes poorly disclosed—risks.
Financial Dispute Legal regularly assists clients whose financial advisers recommended that they use their self-managed superannuation funds (SMSFs) to invest in private lending arrangements. These investments may be described as secured loans, mortgage funds, private debt funds, debentures, unsecured notes or fixed-interest opportunities.
When the borrower or investment fund encounters financial difficulty, investors may discover that their capital is illiquid, inadequately secured or unlikely to be recovered. In some cases, the recommendation may have exposed a client’s retirement savings to risks that were not appropriate for their circumstances.
What is private credit?
Private credit broadly refers to lending undertaken outside the traditional banking system. Investors provide capital, directly or through a fund or trust, to businesses and property developers seeking finance.
A private credit investment may take the form of:
- units in a managed investment scheme or private debt fund;
- mortgage-backed loans;
- secured or unsecured notes;
- debentures;
- loans made through an investment trust;
- construction or property-development finance; or
- loans made directly by an SMSF to a company or project.
Private credit can provide legitimate funding to businesses that cannot, or prefer not to, borrow from a bank. It may also offer investors higher interest rates than conventional cash and fixed-interest products.
Those higher returns generally reflect higher risk. The relevant borrower may have substantial existing debt, limited cash flow, speculative assets or insufficient access to conventional bank finance. Investors may also face significant difficulty obtaining reliable information about the borrower, the value of the security and the priority of competing lenders.
Why ASIC and the Reserve Bank are concerned
The Australian Securities and Investments Commission (ASIC) has described current conditions as the private credit sector’s “first real test”. ASIC’s concerns follow several high-profile borrower failures and decisions by some private credit funds to restrict or limit investor redemptions including ASIC issuing stop orders against:
- TruePillars Investment Trust;
- RELI Capital Mortgage, and
- La Trobe Australian Credit Fund.
ASIC’s concerns include that retail investors and superannuation exposure is increasing to private credit, with recent isolated incidents highlighting how Australian retail investors can be exposed to these investments.
Bathla and Adgemis: recent warnings for investors
The Bathla and Adgemis matters are separate insolvency events, but both illustrate the risks that can arise when businesses rely heavily on non-bank lending.
Major New South Wales property developer Bathla has appointed administrators to a number of companies. According to the ABC report, Bathla’s parent company, Universal Property Group, recorded liabilities of approximately $3.2 billion as at 30 June 2025, with much of that debt reportedly owed to private credit funds.
Voluntary administration does not necessarily mean that all creditors and investors will lose their money. Its purpose is to investigate the companies’ affairs and determine whether they should enter a deed of company arrangement, return to the directors’ control or be placed into liquidation. The eventual position of each investor or lender will depend on matters including the relevant entity, loan terms, security and priority.
Jon Adgemis and his hospitality businesses reportedly borrowed approximately $1.8 billion, much of it through private credit arrangements. His bankruptcy and the collapse of associated hospitality interests have brought renewed attention to complex financing structures, property valuations, multiple securities and the consequences of highly leveraged borrowing.
These events do not establish that all private credit investments are unsuitable. They do demonstrate why the description of an investment as “secured”, “property-backed” or “fixed interest” should not be treated as meaning that it is safe.
How Financial Dispute Legal can help
Financial Dispute Legal acts for investors who have suffered losses after being advised to invest SMSF or personal funds in private credit, managed funds, investment trusts, mortgage funds, unsecured notes, debentures and related products.
Potential recovery options may include an AFCA complaint or other proceedings against an adviser, Australian financial services licensee, promoter or other responsible party.
If you have concerns with a private credit investment, contact Financial Dispute Legal on 1300 433 533 or enquiry@fdlegal.com.au to discuss the circumstances of an investment and potential compensation rights.
