Deloitte China Turnaround & Restructuring team advised bank syndicate in the high-profile restructuring of a HK$4.5B loan secured by two luxury hotels located in Hong Kong and owned by one of China’s leading property development groups

Project Background

Deloitte China Turnaround & Restructuring team (“Deloitte T&R”) recently spearheaded the successful debt restructuring of a HK$4.5B syndicated loan secured by two luxury hotels in Hong Kong (the “Asset”) which were mortgaged by one of China’s largest property developers (the “Borrower”) to an offshore bank syndicate consisting of international, PRC and Hong Kong banks (the “Bank Syndicate”) (the “Restructuring”).

The COVID-19 pandemic severely impacted Hong Kong’s hospitality industry, with occupancy rates dropping to record lows. The effects of the pandemic, coupled with the Borrower’s wider financial issues and the increases in HIBOR due to US Federal interest rate hikes, resulted in a liquidity crunch for the Borrower, and triggered a default of the secured loan.

Role of Deloitte T&R

Deloitte T&R’s assignment took place in the context of challenging negotiations involving the Borrower, the Bank Syndicate, and the hotel manager (who had the sole and exclusive authority to operate the hotels). Deloitte T&R was well-placed to advise its clients on establishing strategic plans that focused on addressing the Borrower's immediate liquidity issues and the provision of breathing room for the Borrower until the business operations of the Asset improved as recovery from the downturn grew in strength.

Deloitte China’s Hong Kong based Turnaround and Restructuring (T&R) team was engaged by a diversified Bank Syndicate of 7 banks. Deloitte T&R played a critical role in formulating possible restructuring options after analysing the Asset’s background, operation model and cash flow forecast to assess factors such as liquidity, financial outlook, and debt service capability. After robust and comprehensive analysis of the fundamentals, Deloitte T&R formulated possible restructuring options to address the identified short-term cash flow mismatch. Deloitte T&R played an instrumental role in navigating the complex yet constructive negotiations amongst stakeholders and advising the Bank Syndicate with regard to the proposed restructuring and options available.

The terms of the hotly negotiated consensual restructuring plan were based on the fundamentals and cash-generating ability of the Asset’s operations, aim to preserve and create value for all parties, and they ultimately received buy-in from relevant stakeholders.

Business Impact

The consensual restructuring deal was concluded within 10 months and provided breathing space for the Borrower whilst protecting the creditors through a carefully designed orderly disposal process.

Bank Syndicate members complimented Deloitte T&R on the expertise and professionalism it demonstrated during the entire process and retained Deloitte T&R to provide ongoing monitoring services covering both the financial and operational status of the Asset.

For further information, please contact Deloitte’s T&R group:

Una Ge
Engagement Partner
Email: uge@deloitte.com.hk