Background
Bonds issued by a European company were trading at distressed levels and presented an attractive opportunity in the event of a debt-for-equity restructuring. But the investment was contingent on the actions of the company’s shareholder – a Chinese investment firm. Covenants gave the shareholder great scope to disadvantage bondholders. Our client wanted to know: would the shareholder play rough or play fair?
Investigation
Greyhawk co-ordinated a series of discreet interviews in Chinese and Hong Kong financial circles. While maintaining strict client confidentiality, we interviewed former executives of the Chinese firm, executives at rival funds, former regulators, and other market participants. Our interviewing was combined with in-depth analysis of open sources in English and Chinese. This included the shareholder’s financial statements, those of its portfolio companies and regional news media.
Value
Our analysis explained how the investment firm viewed its equity holding in the issuer. We provided insight into the shareholder’s strategic priorities, the views of its limited partners and described how it was likely to behave in negotiations. A strong consensus emerged that the Chinese shareholder, with little prior experience of restructuring its portfolio companies, would play fair. Greyhawk’s analysis gave our client the confidence to invest.