The people behind the indebted developer’s overhaul: China Evergrande

SYDNEY/HONG KONG: Restructuring experts from Alvarez & Marsal will rely on China connections and a track record of complicated corporate overhauls as they try to engineer an outcome for property giant Evergrande that will involve creditors, authorities and home buyers.

Tiffany Wong and Eddie Middleton, both managing directors at A&M, were appointed by a Hong Kong court last month after a liquidation petition was approved following about 18 months of talks with China Evergrande Group’s offshore creditors.

Evergrande, founded in 1996 by Hui Ka Yan, grew to become the poster child of China’s property boom in the first two decades of the 2000s.

But the company, with total liabilities of $300 billion, defaulted on its offshore debt in 2021, and Hui is under investigation for suspected crimes.

Evergrande’s future now sits with Wong and Middleton, who first worked together at KPMG, as they try to either restructure its offshore debt or embark on a more complicated liquidation, a process which is expected to see the involvement of various Chinese authorities.

Beijing has been scrambling to contain the fallout from the debt crisis in the property sector, which accounts for roughly a quarter of the economy, and has made completion of unfinished homes a priority due to worries about social unrest.

Managing the Evergrande overhaul is especially crucial given its scale of operations and debt. Some international distressed debt investors estimate it could take up to 15 years to resolve its complex situation, set to be one of the largest liquidation exercises globally.

China Evergrande shares tumble 25% after wealth management staff detained

“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.”

The duo, and their company A&M, have fostered some good relations with major investors in the region, particularly hedge funds, thanks to their flexible and transparent working style, according to two separate sources who have worked at the firm.

A&M has a team of several dozen staff based in mainland China, said one of the sources, making it one of the few global restructuring firms with a sizeable team onshore and which could facilitate Evergrande liquidation work by Wong and Middleton. Wong, Middleton and A&M declined requests for comment.

“Strong heart”

Middleton spent 15 years at KPMG up until 2017, then shifted to Houlihan Lokey’s Asia Financial Restructuring Group for two-and-a-half years before joining A&M in July 2020.

During his time in Hong Kong, Middleton has served as lead liquidator of Lehman Brothers’ Asia operations and joint liquidator of Oasis Hong Kong Airlines.

Wong was at KPMG China for nine years until 2019 when she joined A&M, according to her LinkedIn profile, which shows she studied at Queensland University of Technology in Australia.

She first studied business management and psychology during college time in Australia, and later took up accounting.

In an interview with Hong Kong Economic Journal last September, Wong said it took a “strong heart” to deal with her job as a liquidator.

“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 oversaw the complicated restructuring of China’s Luckin Coffee which concluded in 2022, after $460 million worth of convertible notes were successfully restructured after the company paid a $180 million penalty to settle accounting fraud charges.

Wong and Middleton’s Evergrande appointment by the Hong Kong court came after the top four accounting firms were considered mostly to have had a conflict of interest that would rule them out of being Evergrande’s liquidators, according to two legal sources.

PwC, for instance, served as Evergrande’s long-term auditor, Deloitte carried out a liquidation analysis and KPMG was involved in the developer’s initial restructuring proposal, according to sources and regulatory filings.

That left EY, but lawyers for the ad hoc offshore bondholders’ group argued against their appointment in court, PwC, in a statement to Reuters, said its last audited report for Evergrande was for the financial year to December 31, 2020 and “we have resigned since then”. EY, Deloitte and KPMG did not respond to Reuters’ requests for comment.

The ad hoc group pushed for Middleton and Wong to be granted the mandate as independent liquidators based on their extensive experience in sorting similar cases, according to the court hearing last month.

“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.