Alvarez & Marsal’s restructuring specialists will rely on their contacts in China and experience with intricate business turnarounds to try to work out a solution for real estate behemoth Evergrande that will involve creditors, regulators, and home buyers.

A Hong Kong court appointed managing directors Tiffany Wong and Eddie Middleton to A&M last month after approving a liquidation petition after almost eighteen months of negotiations with the offshore creditors of China Evergrande Group.

Hui Ka Yan created Evergrande in 1996, and in the first two decades of the 2000s, the company rose to prominence as the face of China’s real estate boom. However, the $300 billion company’s offshore debt was not paid off in 2021, and Hui is being investigated for possible criminal activity.

Wong and Middleton, who originally collaborated at KPMG, are now in charge of Evergrande’s destiny as they attempt to either restructure the company’s offshore debt or begin a more involved liquidation process that is anticipated to involve numerous Chinese officials.

Beijing has been rushing to minimise the effects of the debt problem in the real estate industry, which makes up around 25% of the GDP, and has prioritised finishing up unfinished housing projects because of concerns about social unrest.

Considering the size of its businesses and debt, overseeing the Evergrande makeover is extremely important. Its complex predicament, which is expected to be one of the largest liquidation procedures globally, might take up to 15 years to resolve, according to some international distressed debt investors.

“Tiffany is usually the one running the connection onshore,” said a person who has worked with her on liquidation cases, declining to be identified due to the sensitivity of the matter.

“When she runs these things, she’ll immediately identify all the relevant authorities onshore, and she’ll go contact them … Eddie tends to do most of offshore stuff and Tiffany explains the legal stuff onshore, and tries to get the political directives from onshore.”

According to two different people who have worked at the firm, the pair, along with their company A&M, have built some solid contacts with significant investors in the region, mainly hedge funds, thanks to their transparent and flexible working style.

According to one of the sources, A&M employs a number of dozen people in mainland China, making it one of the few international restructuring companies with a sizable onshore workforce that may support Wong and Middleton’s Evergrande liquidation work.

There were no comments on the issue from Wong, Middleton and A&M.

Middleton worked with KPMG for fifteen years until 2017. After that, he moved for two and a half years to the Asia Financial Restructuring Group of Houlihan Lokey, where he remained until July 2020.

Middleton has had positions as joint liquidator of Oasis Hong Kong Airlines and lead liquidator of Lehman Brothers’ Asia operations while he has been in Hong Kong.

Wong studied at Queensland University of Technology in Australia, and her LinkedIn page indicates that she was employed at KPMG China for nine years before to joining A&M in 2019. While attending college in Australia, she initially focused on psychology and business management before switching to accounting.

Wong noted that handling her work as a liquidator required a “strong heart” in an interview with the Hong Kong Economic Journal in September of last year.

“You will be facing a lot of negative emotions doing this job. Almost no one you meet will be happy … so you need to know how to take care of your own emotions, while having a sense of responsibility,” she said in the interview.

“(In most cases), we try to save a company, rather than winding it up,” she added.

Wong managed the intricate reorganisation of Luckin Coffee, a Chinese corporation, which came to an end in 2022 after $460 million in convertible notes were skillfully reorganised following the company’s $180 million payment to resolve accusations of accounting fraud.

According to two legal sources, the top four accounting firms were mostly deemed to have had a conflict of interest that would have precluded them from serving as Evergrande’s liquidators. As a result, the Hong Kong court appointed Wong and Middleton to oversee Evergrande.

According to sources and regulatory records, PwC, for example, was Evergrande’s long-term auditor; Deloitte conducted a liquidation investigation; and KPMG was involved in the developer’s initial restructuring proposal.

That left EY, but attorneys representing the group of ad hoc offshore bondholders contested their appointment in court.

In a reply to Reuters, PwC stated that “we have resigned since then” and that its most recent audited report for Evergrande covered the fiscal year ending December 31, 2020.

Reuters contacted EY, Deloitte, and KPMG for comment; none of them responded.

According to the court hearing last month, the ad hoc group argued that Middleton and Wong should be appointed as independent liquidators due to their considerable experience in resolving such instances.

“Our priority is to see as much of the business as possible retained, restructured, and remain operational. We will pursue a structured approach to preserve and return value to the creditors and other stakeholders”, Wong said after the hearing.

(Adapted from Reuters.com)