Xie Yu and Scott Murdock
HONG KONG/SYDNEY (Reuters) – Country Garden has hired Kroll to conduct a liquidation review ahead of a court hearing in mid-May, according to three sources, as the embattled Chinese developer presses ahead with its offshore debt restructuring plan.
Kroll, a financial advisory firm headquartered in New York, is expected to conduct an independent business review of Country Garden before forecasting the level of recovery to the developer’s creditors in the event of a liquidation scenario, according to people with direct knowledge of the matter.
Country Garden, China’s largest private property developer, received a winding-up petition last month for failing to repay a $205 million loan and faces its first court hearing in the case on May 17.
The sources declined to be identified because the information remains confidential.
Country Garden and its consultant KPMG declined to comment. Kroll did not respond to Reuters queries on Wednesday.
In restructuring cases, companies must carry out independent liquidation analyzes to assess potential recovery rates for creditors under debt restructuring schemes, as well as for court liquidation hearings, legal experts say.
China’s real estate sector has been facing one crisis after another since 2021 after regulatory crackdowns on high leverage among property developers triggered a liquidity crisis.
Kroll is in its early stages and it could take several months for lenders to see the results of the review, three sources said.
Country Garden defaulted on $11 billion of its offshore debts after missing a principal payment last October. The developer previously hired KPMG and law firm Sidley Austin as consultants to review its capital structure and liquidity position and develop what it called a “holistic” solution for lenders.
Kroll’s role will be separate from that task, sources said.
In a similar scheme, the real estate giant in China Evergrande (HK:) chose Deloitte to review the liquidation and cited a low recovery rate of 3.4% to fend off the winding up petition before the court ordered it into liquidation in January.
Country Garden’s two main groups of creditors, one made up of bondholders and the other from banks, have been in talks with KPMG since January about a debt restructuring plan, three sources said.