Restructuring activity in Australia in 2026 is likely to be concentrated in a few sectors that offer a range of opportunities to deploy capital in distressed assets and special situations.
Among the sectors most under stress are renewable power projects on the east coast. Challenges relating to grid connections, delays and cost increases in the construction of network improvements, and transmission bottlenecks, are beginning to undermine project assumptions and returns. Many individual assets are “good” but the Australian energy system is under pressure from holdups and rising costs. The outlook is also unpredictable for legacy coal generation assets, as governments (both state and federal) try to balance decarbonization targets with energy security. Amid this policy uncertainty, investors are questioning how long some plants can keep operating, and on what terms—making capital-raising and therefore commitment to needed expenditure difficult.
In parallel, energy-intensive manufacturers are also contending with high power prices as the energy transition takes longer and costs more than first assumed. This is putting assets such as smelters and large-scale processing plants under strain, with some becoming unviable without government support.
Also facing pressure are COVID-era, sponsor-backed companies that now need to refinance as fund life limits approach and their earnings and growth prospects no longer fit their existing capital structures. As a result, lenders are likely to push for sales or consider taking control. Many businesses in this position are sound and cash generative, despite their financing challenges.
Elsewhere, the picture is more stable. The wider Australian economy remains broadly steady, although there are some signs of pressure here, too. Households remain stretched by high housing costs and lingering inflation. This may prompt the Reserve Bank of Australia to consider further interest rate increases this year. Any such decision may dampen consumer demand and hit operating margins.
To offset the risk to business, deep pools of superannuation capital and a resilient equity market should continue to provide liquidity for refinancings and equity support. Even so, the scene is set for more restructurings in the year ahead, rather than any broad-based economic upheaval.
Against this backdrop, Australia’s restructuring framework provides a well-tested set of options for corporate rescues that preserve value for companies and creditors.
Where the problem is operational, voluntary administration provides breathing space under a statutory moratorium overseen by administrators and can lead to a binding deed of company arrangement (DOCA) that can effect a creditor restructuring. It can also tackle issues such as leases, suppliers, staffing and tax. If the problem is financial, schemes of arrangement allow for a court-approved compromise with creditors, and receivership remains available as a creditor-focused enforcement route in lender-led cases.
As more large Australian balance sheets now include New York- or English-law-governed debt held by offshore creditors, cross-border restructuring is becoming increasingly relevant. That makes forum choice a key consideration because it can shape recognition and enforcement of a restructuring plan across multiple jurisdictions.
For businesses, lenders, trade creditors and investors deploying capital into distressed assets and special-situations opportunities, the nuances of Australia’s operating environment and the pressures reshaping key sectors matter. Understanding this context is as important as knowing the capabilities of the restructuring and insolvency tools that will support successful outcomes in 2026.
Managing regulatory and workforce risks
Three issues commonly delay or derail distressed M&A in Australia, but each is manageable if addressed early.
The first is foreign investment screening. Boards should analyze and document precisely what the Australian business does and who its customers are. Getting an accurate and sufficiently in-depth understanding of an investment target’s operations is not always straightforward; for example, a software component that eventually ends up in a defense product may trigger detailed scrutiny, even if the immediate buyer of the component is not considered to be sensitive. Early due diligence, particularly analyzing the target’s key markets, coupled with clear enduse mapping of products and a realistic timetable to accommodate discussions with Australia’s Foreign Investment Review Board, can reduce regulatory delay and deal-completion uncertainty.
The second is merger control. The Australian Competition and Consumer Commission (ACCC), the country’s main competition regulator, in January 2026 introduced a more robust merger control regime. Parties must notify notifiable acquisitions and wait for ACCC approval before completion. In the short term, there may be delays in getting clearance while the new system beds in. However, delays can be reduced when sellers compile detailed market share data, a map of competitors and forward business plans so submission documents can be prepared quickly to help the regulator understand the deal rationale.
The third is employee liability exposure. An important feature of Australia’s workplace system is enforceable minimum pay and conditions. Owing to the system’s complexity, it is still possible today for even the most well-run businesses to be caught out if they have inadvertently misapplied modern awards or used the wrong pay classifications. Missed overtime, penalty rates or underpaid superannuation are among the most common problems.
Investors and lenders should consider factoring these risks into their due diligence. Conducting robust payroll analysis or an award compliance audit can uncover problems early so they can be dealt with, or any liabilities ring-fenced. Failing to do so may have costly consequences, including backpay (sometimes with interest), regulatory penalties and employee claims.
Beyond investment and deal risks, Australia’s restructuring toolkit and overall approach to insolvency are also evolving.
Australia’s insolvency framework is generally seen as creditor-friendly, but more attention is now being paid to earlier rescues (particularly out-of-court solutions), including liability-management exercises.
A wave of loans maturing in 2026–27 will force refinancing decisions. Renewables affected by grid constraints often stay with banks or public markets—which are typically cheaper, if less flexible, than private credit—because their growth profile cannot absorb higher-coupon pricing.
By contrast, many sponsor-backed corporates will refinance using private credit, trading looser covenants for higher pricing. Those choices often influence whether a restructuring can be resolved consensually or if it will need a formal process.
Forum choice and recognition in cross-border restructuring
In Australian cross-border restructurings, the choice of forum and the quality of evidence provided in support of the case largely determine whether a plan is recognized and enforced.
The decision turns on three basic questions: where the debtor is based, which law governs the liabilities to be restructured, and whether key creditors can be brought within the court’s jurisdiction.
The answers to these questions should also identify the powers required from the process, such as cross-class cram-down and debtor-in-possession financing. The scope of those powers will determine whether Australian procedures are sufficient, or whether a foreign forum is required—either instead of or alongside an Australian procedure.
Where New York-law debt is held by U.S.-based creditors, Chapter 11 is often the natural venue. However, it is also an expensive process. An English restructuring plan can be a cheaper option, but careful consideration needs to be given to recognition of its effectiveness where the debt is not English-law-governed or there are not English obligors. Conversely, when dealing with English-law debt, care is still needed around the “Rule in Gibbs”, where English courts will generally only recognize a release or compromise of English-law-governed claims via an English-law-governed process. This makes understanding the location of key creditors, and their susceptibility to the personal jurisdiction of other legal systems (e.g., the United States or Australia) critical to the forum and procedure-selection analysis.
Practitioners sometimes use U.S. Chapter 15 as a route to recognition of an Australian or other foreign process recognized in the U.S. But there is an important caveat. Chapter 15 is a recognition regime that lets a U.S. court recognize and support a foreign proceeding. It does not provide a full restructuring forum, and so consideration is still required around the effectiveness of the “main” proceeding to bind key creditors.
The order in which the domestic and foreign elements of a cross-border plan are implemented will depend on the mix of creditors involved. If Australian-based creditors have to be compromised, processes like a scheme of arrangement or a voluntary administration may be needed alongside a foreign process for overseas creditors.
Ultimately, the evidence should show who is owed what, which law governs those claims, why the proposal is workable and what recognition is needed. Getting this right is likely to speed up proceedings and improve the chances of a successful outcome in court.
Priorities for investors, lenders and businesses under stress
The year ahead will provide opportunities for investors and lenders to deploy capital in a range of distressed businesses and special situations. Early preparation and a focus on the most complex risks is likely to provide a strong foundation for all parties involved in a deal. Foreign investment, merger control and employee-liability risks can hold up processes—and in some cases stop them.
For companies under stress, the priority should be to diagnose whether the problems facing their business relate to its operations or its balance sheet. That analysis can shape whether a consensual path is realistic, or a formal process is the more effective route, and if so what formal process (or processes) should be deployed.
Choice of forum should be based on a thorough assessment of the powers and recognition needed to deliver an enforceable result for the creditor groups that must be bound outside Australia. Debtors should do this proactively, rather than reactively, to promote the best outcomes for the business and its stakeholders.
