By Xie Yu and Scott Murdoch
HONG KONG/SYDNEY (Reuters) -Country Garden has hired Kroll to carry out a liquidation analysis ahead of a court hearing in mid-May, according to three sources, as the embattled Chinese developer pushes ahead with its offshore debt restructuring plan.
Kroll, the New York-headquartered financial advisory firm, is expected to conduct an independent business review of Country Garden before projecting a recovery rate for the developer’s creditors under a liquidation scenario, according to the sources with direct knowledge of the matter.
Country Garden, China’s biggest private developer, received a liquidation petition last month for non-payment of a $205 million loan and is facing the first court hearing in the case on May 17.
The sources declined to be named because the information remained confidential.
Country Garden and its advisor KPMG declined to comment. Kroll did not respond to Reuters queries on Wednesday.
In restructuring cases, companies must conduct an independent liquidation analysis to assess potential recovery rates for creditors for debt restructuring schemes, as well as for liquidation court hearings, legal experts said.
China’s property sector has lurched from one crisis to another since 2021 after a regulatory crackdown on high leverage among developers triggered a liquidity crisis.
Kroll is in the early stages, and it might take a few months for the creditors to see the results of the analysis, said the three sources.
Country Garden saw its $11 billion of offshore debts in default after missing a key payment last October. The developer has previously hired KPMG and law firm Sidley Austin as advisers to examine its capital structure and liquidity position and formulate what it called a “holistic” solution for creditors.
The role of Kroll will be separate from that task, according to the sources.
In a similar arrangement, property giant China Evergrande (HK:) picked Deloitte for a liquidation analysis, and cited the low recovery rate of 3.4% to fight back a liquidation petition before a court ruled its winding up in January.
Two major groups of Country Garden creditors, one formed with bondholders and another with banks, have been in talks with KPMG for the debt restructuring plan since January, said the three sources.
