Restructuring specialists boost Hong Kong staff as China property crisis stokes demand

China Aoyuan

26/02/2024 23:00

By Scott Murdoch and Clare Jim
       SYDNEY/HONG KONG, Feb 27 (Reuters) - Global
restructuring specialists Alvarez & Marsal and Houlihan Lokey
 HLI.N  have boosted headcount in Hong Kong as China's property
crisis results in a surge in debt restructuring deals - making
them a rare bright spot in hiring for the city's financial
sector.
    China's property industry, a key pillar of the world's
second-largest economy, has lurched from one crisis to another
since 2021 after a regulatory crackdown on debt-fuelled
construction triggered a liquidity squeeze.
    According to a Reuters tally, around 20 Hong Kong-listed
Chinese real estate developers have defaulted on dollar bonds
which would require them to enter into restructuring talks with
creditors or face liquidation.
    Alvarez & Marsal, which saw two of its managing directors
appointed last month by a Hong Kong court to liquidate property
giant China Evergrande Group  3333.HK , said its China business
had about 260 staff as of end-January, up from about 200 a year
ago.
    It declined to provide a breakdown of its hiring but
industry sources with direct knowledge of the matter said the
New York-based firm had been building up its restructuring and
corporate performance units. The sources were not authorised to
speak to media and declined to be identified.
    Houlihan has advised Evergrande as well as Sunac China
 1918.HK  - the first Chinese developer to complete an offshore
debt revamp in the wake of the crisis. It said its team in Hong
Kong and China has expanded over the past two-and-a-half years.
    "Over this period, the team has grown by more than 50%. We
believe there is opportunity for continued growth in China and
we are actively recruiting for four additional team members at
the moment," a spokesperson said without giving a specific
number.
    Demand for debt restructuring professionals has seen a
significant uptick since the beginning of 2023 and the trend is
expected to continue this year, said Chris Corcoran, financial
services senior manager at headhunter Robert Walters.
    "It feels like a week doesn't go by where there isn't
another story about a large company considering some form of
restructuring," he said, adding that this was occurring across
various sectors.
    Additionally, U.S. law firm Sidley Austin said it now has
seven lawyers in Asia in its restructuring practice which was
created in the past couple of years. The team works alongside
its four capital market partners in Asia, it added.
    The hiring by restructuring specialist firms contrasts with
the numerous investment banking jobs being cut in Hong Kong and
on the Chinese mainland - cuts that are expected to gather pace
this year due to deepening economic and market gloom in China. 
    That gloom has contributed to a sharp plunge in Hong Kong
and mainland stock market and deal activity, weighing on the
city's prospects as a regional financial hub.
    
    REWARDS
    Winning a restructuring deal usually means handsome fees.
    Advisors employed by restructuring companies and bondholder
groups are paid monthly retainers, milestone payments when
specific stages are achieved, and success payments when the deal
is completed.
    In the case of property developer China Aoyuan  3883.HK ,
whose $6 billion offshore debt restructuring deal went into
effect last month, fees for its nine legal advisers and counsel
including Linklaters came to a total of $16 million, according
to filings. 
    Fees for its financial advisers - KPMG, Deloitte and
Admiralty Harbour - were $11.7 million, the documents showed. 
    Due to the uncertainty and complexity involved in these
deals, however, so-called success payments may not eventuate.
    After close to two years of negotiations, Evergrande and its
bondholder group's advisors are not able to receive these
payments because the company was ordered into liquidation.

 (Reporting by Scott Murdoch in Sydney and Clare Jim in Hong
Kong; Editing by Sumeet Chatterjee and Edwina Gibbs)
 ((Scott.Murdoch@thomsonreuters.com;))