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Debt restructurings

Overview

Dealing with a heavily indebted Chinese company is rarely straightforward. Many companies in China have significant state ownership and China's debt restructuring process is still in the early stages of its development.

PwC can help to stabilise and turn around businesses that are underperforming, distressed or in crisis. The tailored reviews and monitoring services we provide to financial stakeholders, or to the business itself, give much needed clarity. This can help to improve the dialogue between all parties and allows for an informed evaluation of the available options.

Whilst fostering a sense of cooperation and consensus among stakeholders and with the business, we can identify those issues affecting performance and put forward suggestions to find the most positive outcome.

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Potential issues

If you have a financial interest in a business in China that is underperforming, or you simply aren’t being given the right calibre of information on performance, you may:

  • need to appoint independent financial advisers to review and analyse the situation for you.
  • want to have a greater understanding of the borrower or investee’s business before you consider your next steps.
  • need to assess which options for safeguarding your investment will lead to the greatest prospects of recovery.
  • want to consider whether a debt restructuring plan is viable, and seek advice on the implementation of the proposed debt restructuring and turnaround plans.

As a business owner, member of the board or management, if your business is experiencing financial difficulty or distress, you may need to:

  • understand the cause of any underperformance
  • evaluate options to help turn the business around
  • get advice on asset and business-segment disposals and on refinancing and fund raising options
  • communicate, and address, the demands of your lenders/stakeholders.

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Support

  • Identify operational and financial problems and assist management in reorganising the company's strategy.
  • Conduct specific and detailed investigations and analysis to facilitate a greater understanding of the debtor's business by assessing its current and prospective financial position and viability.
  • Review and analyse forecasts and business projections to assess their plausibility. This can include cash and working capital requirements.
  • Recommend a range of options for short and long term debt restructuring/turnaround with the aim of negotiating continued support from lenders.
  • Assist in communications with domestic China authorities and the local government, which is often the key to a successful debt restructuring.
  • Provide insight into any trends that may be impacting a business’s sources and uses of cash and working capital.
  • Ensure due diligence by monitoring a business’s cash flow, including reconciliation with restructuring plan requirements.
  • Lead the debt restructuring and turnaround process and coordinate the work of all other professionals involved.
  • Find potential new investors and potential buyers of group assets/businesses.
  • Facilitate negotiation and rebuild trust between a business and its financial stakeholders, with the ultimate goal of reaching an amicable solution for all concerned parties.
  • For more details about our service offering for debtors, please go to Debtor Advisory.

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Our experience

  • Appointed as an independent financial adviser to assist the PRC subsidiary of an Italian steel manufacturer to formulate a debt restructuring plan, negotiate with the banks and introduce potential investors for the business.
  • Acted as reporting accountant to a Chinese Bank Group in which the target company was a PRC paper manufacturer.
  • Provided advice to offshore creditors on a debt restructuring negotiation involving local authorities and over 20 banks.
  • Conducted a review for noteholders on the financial condition and performance of one of the largest solar panel manufacturers in China, listed in the USA with liabilities of more than US$1 billion. Our main objective was to facilitate a comprehensive rehabilitation and cross-border restructuring of its financial and operational affairs.
  • Conducted a review for noteholders on the financial condition and performance of a real estate group in China with gross asset value of over US$2 billion. By way of receivership, we effected an optimal visit for the existing noteholders through the secondary market.
  • Worked for a creditor bank in reviewing the financial condition and performance of a retailer in breach of loan covenants. The business had over 200 outlets across Asia and an annual turnover of over US$150 million. After our evaluation and collateral monitoring, we helped renegotiate the terms of repayment and advised on a proposed business exit plan.
  • Appointed as independent financial advisers to assist a banking syndicate assess and negotiate the debt restructuring proposal for a distressed Vietnamese shipping container terminal with debts of US$100 million.
  • Performed a financial and operational review of a distressed manufacturer of garment fasteners, listed in Singapore with operations in the PRC. This resulted in a debt restructuring agreement between the bank group and the company. We undertook cash flow and collateral monitoring which helped assure the bank group that the business was viable, and the company resumed loan repayments.
  • Appointed as the financial adviser of a major Chinese bank to ensure due diligence and review the position of a financially distressed Sino-foreign jointly controlled air cargo carrier. The total debt exposure was RMB3.5 billion. We provided advice on the possible exit strategy.

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Contact us

Victor Jong

Victor Jong

Mainland China and Hong Kong Restructuring & Insolvency Leader, PwC Hong Kong

Tel: +[852] 2289 5010

Tim Guo

Tim Guo

Partner, PwC China

Tel: +[86] (21) 2323 2610

Christopher So

Christopher So

Partner, PwC China

Tel: +[852] 2289 2577

Chen Lau

Chen Lau

Partner, PwC China

Tel: +[86] (10) 6533 2208

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