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Asian distressed debt investment

The Challenge

Our client, a distressed debt investor, was considering acquiring the bonds of a European company with a view to playing an active role in any future restructuring of the debt. The success of the trade would depend, to a large degree, on the conduct and negotiating strategy of the issuer’s largest shareholder, a Chinese investment firm. Our client wanted to understand how the Chinese investor would act in negotiations and the extent to which it had experience of similar trades.

The Solution

Greyhawk co-ordinated a series of discreet interviews in the Chinese and Hong Kong financial markets. While maintaining strict client confidentiality we interviewed former executives of the investment firm, executives at rival funds, regulators and other market participants. Our interviewing was combined with in-depth analysis of open sources in English and Chinese. This included the investor’s financial statements (and those of its portfolio companies); financial and regulatory disclosures concerning the bonds; and Chinese state-owned and independent media.

The Result

Our report provided well-supported views as to how the investment firm viewed its equity holding in the bond issuer. It provided insight into the investor’s strategic priorities, the views of its limited partners and described how it was likely to behave in negotiations. We concluded that there was strong appetite for a deal with our client and that the firm had little experience of this type of transaction. The investment firm had a reputation for playing straight and would not act unfairly towards our client.