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APAC (ex-Japan) mandates mushroom as protracted workouts yield new advisory opportunities

The number of debt-restructuring-advisor appointments in APAC (ex-Japan) mushroomed in 2Q23 compared to the previous quarter, though this sharp increase wasn’t due to a spike in new distressed situations, but rather to additional appointments being made on restructuring processes that had begun before the quarter.

A total of 72 mandates were awarded in APAC (ex-Japan) in 2Q23 compared with 40 in 1Q23 and 70 in 2Q22. Of the 72 mandates, 51 came from situations in which a debtor had defaulted for the first time or where advisors were appointed prior to this year. The advisory roles awarded in 2Q23 were for situations that involved a total USD 50.1bn debt, up significantly from USD 18.1bn in 1Q23 but down slightly from USD 59.8bn in 2Q22.

The 2Q23 numbers bring the total number of mandates awarded in the first half of the year to 112 roles in situations involving an aggregate USD 66.9bn debt. By comparison, there were 174 mandates involving USD 172.9bn debt in 1H22.

'Legacy’ Chinese Property workouts provide significant restructuring work

As was the case in 2022, most of the mandates in 1H23 were PRC situations related to the real-estate sector. In 2Q23, Chinese real estate sector roles accounted for 35 of the total APAC (ex-Japan) mandates and involved debt of USD 34bn, or 67.9%, of the total debt for which roles were awarded in the region in the quarter. As a result, the number of mandates related to Chinese real-estate situations in 1H23 totalled 48 on USD 40.3bn of debt versus 85 roles in 1H22 on an aggregate debt of USD 121.3bn.

Almost all the 35 China property sector mandates in 2Q23 were those that arose out of situations in which the debtor had defaulted or where restructuring advisors had been appointed prior to the April-June quarter. Thus, out of the 35 mandates arising from situations involving 18 developers or property managers, only one — Guangzhou Fineland Real Estate’s appointment of China CITIC in June for a potential liability management exercise for its 340m due-27 July 2023 bonds – was a mandate involving a new stressed or distressed situation.

Five of these ‘legacy’ (i.e., situations where mandates or defaults had occurred prior to 2Q23) situations involved Chinese property companies that were each seeking to restructure more than USD 2bn in debt. The cohort included four developers – China Aoyuan Group, KWG Group, Jiayuan International Group and Powerlong Real Estate – as well as financial services and real estate conglomerate Oceanwide Holdings.

  • Aoyuan, which had by far the most mandated debt in this report, appointed PwC in mid-June as a monitoring accountant to ensure it remained in compliance with a standstill agreement. The developer on 2 July announced a holistic offshore restructuring plan, slightly more than 18 months after it first appointed restructuring advisors in November 2021.
  • Oceanwide Holdings, which first defaulted on its offshore bonds in April 2021, finally provided some advisory work, with the company on 29 May this year announcing that Zhong Lun Law Firm had the same day been appointed by a Beijing Court as its provisional administrator. Prior to that announcement, Oceanwide had never announced the appointment of restructuring advisors, nor a proposal to restructure its debt.
  • KWG announced on 14 May this year that it hired Sidley Austin to explore holistic solutions for its offshore debt. The developer completed a distressed exchange for three offshore bonds in September 2022.
  • Jiayuan was ordered into liquidation in May this year, with the Hong Kong High Court appointing Hong Kong’s Official Receiver as the developer’s provisional liquidator. The developer is seeking to have the Hong Kong court’s winding up order overturned. In August 2022, Jiayuan launched an exchange offer with a concurrent scheme restructuring support agreement (RSA) for its six offshore straight bonds, with the developer extending the process 11 times but ultimately abandoning the exchange offer on 26 April this year and instead opting to proceed with the scheme plan. However, that has so far failed too because of the Hong Kong court’s decision to have the developer wound up.
  • Powerlong appointed numerous advisors for both an exchange offer and a separate term-out consent solicitation launched in June this year that collectively extended the maturity of five offshore bond tranches. The developer announced the success of the deal on 5 July. Almost exactly a year earlier, Powerlong completed an exchange offer for two of its due-2022 offshore bond tranches.


New restructuring situations

Only five restructurings processes began during 2Q23 – the two largest of which were Indonesian state-controlled construction company Wijaya Karya (Persero) Tbk and Indian budget airline operator GoAirlines (India) Pvt Ltd, both of which are seeking to recast over USD 1bn of debt.

Country breakdown

Including the 35 property-related mandates, Chinese companies from all sectors accounted for a total of 45 mandates on USD 43.5bn debt, or 62.5% and 86.9% of the respective 2Q23 totals. As the chart below shows, Chinese companies have provided a huge chunk of the work handed out to APAC restructuring professionals since about mid-2021, when the property sector began to collapse.

After PRC-related situations, the second highest number of mandates awarded in 2Q23 arose from just one Australian-related insolvency: cancer care provider GenesisCare Pty Ltd’s Chapter 11 process, which began on 2 June and generated nine mandates. The Sydney-headquartered company had pre-petition debt of 1.7bn.


Top advisors

Alvarez & Marsal – which was awarded five mandates in 2Q23 involving USD 4.1bn of debt – won the most roles of any financial advisory firm during the quarter. By amount of debt, PwC appears to have towered above other financial advisors with the Big Four firm advising on situations involving USD 18.2bn debt. However, USD 16.83bn of the USD 18.2bn amount came from PwC’s role as Aoyuan’s monitoring accountant.

Sidley Austin won the most mandates of any law firm with seven roles involving USD 7.8bn of debt.