Corinne Ball
Corinne Ball ()

The debt load in China, and in Emerging Markets generally, has been in the news lately with amounts of debt anticipated to go into default reaching an estimated $1.3 trillion.1 Much of this debt is “offshore,” meaning bonds issued by a corporate holding company organized in a what may have been described as a tax haven, such as the British Virgin Islands or the Cayman Islands, which are subject to New York law as a choice of law and typically denominated in U.S. dollars. This offshore debt is often widely held. While the choice of law suggests that the United States and New York, in particular, should be the forum for restructuring, the domicile of the issuer and the forum of the enterprise operations are also available choices. In contrast to the “offshore debt” issued by a holding company, the debt issued by the entity owning the operations is referred to as the “onshore” debt. A default on the “offshore” debt may not affect the operations. Creditor remedies are limited, and local insolvency regimes are untested or ineffective. Indeed, borrowers likely will not undertake a restructuring unless and until there is a disruption (such as a liquidity crisis) at the operating level. Rather than the multi-billion default at the holding company level, it is the need for new money onshore, as well as avoiding enforceable defaults under onshore debt, that cause a court-centered restructuring of the offshore debt.2

At least one situation has confirmed the expectation. In choosing a jurisdiction for its restructuring, rather than rely upon the forum identified in the debt documents as the choice of law to address the obligations under the bonds, the holding company at the helm of a global enterprise relied upon the jurisdictions of its domicile and where it was listed. This enterprise is a Chinese real estate developer Kaisa Group.3 Kaisa Group owns various heavily-leveraged real estate developments in China through a series of entities. It financed its operations through “offshore” and “onshore” debt. The operating entity debt was described as “onshore” debt. To provide additional acquisition capital, Kaisa Group, through its Cayman-domiciled holding company, Kaisa Holdings, which is listed on the Hong Kong exchange, issued bond debt, predominately governed by New York law, denominated in U.S. dollars, primarily to U.S.-based investors. This debt was referred to as “offshore debt.”

Kaisa Holdings became one of the first Chinese real estate developers to default on dollar bonds last year, after it failed to pay the coupons on two securities.4 To remedy the default, which was brought on by an unexpected liquidity crisis, the company sought to reorganize both the “onshore” and “offshore” debt. The “onshore” debt was restructured out of court, and the offshore debt was restructured through schemes of arrangement in the forum of domicile (the Grand Court of the Cayman Islands) and the forum closest to the forum in which the operations are located and where the company’s administrative functions are carried out (the High Court of Hong Kong). To assure the effectiveness of the schemes, and take advantage of the bankruptcy court stay and thereby prevent U.S.-based creditors from commencing collection actions against the company in the United States, Kaisa Holdings commenced a Chapter 15 proceeding in the Bankruptcy Court for the Southern District of New York. The bankruptcy court granted recognition earlier this month.5 The recognition order, entered on June 3, 2016, allows Kaisa Holdings to go forward with implementing the Hong Kong and the Cayman Islands schemes that were sanctioned by the Hong Kong and the Cayman Island Courts, respectively, shortly after the recognition order was entered.6

Kaisa Holdings’ default and the company’s global restructuring efforts may provide insight, if not a template, for many other Chinese companies that are heavily leveraged, having issued onshore debt, as well as offshore corporate bonds, and suffering due to China’s economic slowdown and the strength of the dollar.7 At least 17 Chinese companies have defaulted onshore, and four companies defaulted on offshore liabilities in the last two years.8 The coming year promises to be challenging for a number of Chinese enterprises organized through a holding company, often domiciled in the Cayman Islands or the British Virgin Islands, with operations in China, generally through Chinese subsidiaries, to refinance their debts, since a wave of offshore high-yield debt issues by Chinese businesses is expected to mature in the near future.9 The anticipated magnitude of that trend suggests that available restructuring approaches may also become a vehicle to effect a change of control upon default. The relatively new and little used insolvency regime in China is not expected to yield predictable results. Hence, Kaisa Group’s restructuring, because it is consummated under a well understood and widely recognized approach—a scheme of arrangement in tandem with a U.S. bankruptcy case—merits attention.

Background10

Kaisa Holdings is a Cayman Islands-domiciled parent of an international group of companies incorporated in China, Hong Kong, the British Virgin Islands and the Cayman Islands, which are engaged primarily in development of large-scale residential properties in China, as well as development and management of hotels, shopping malls and catering services, whose operations span 30 cities in five regions in China. While Kaisa Holdings is incorporated under the Cayman Islands Companies Law, its principal place of business is in Hong Kong and it is listed on the Stock Exchange of Hong Kong.

Kaisa Holdings undertook a number of offshore financing transactions, which currently include (1) global mostly U.S.-dollar denominated high yield notes issued by Kaisa Holdings between 2012 and 2014 and governed by New York law with maturity dates ranging from April 22, 2016 to Jan. 8, 2020, (2) 1.5 billion U.S. dollar-settled convertible bonds issued by Kaisa Holdings in 2010 and due on Dec. 20, 2015, and (3) several existing offshore loans. Onshore, there were approximately 84 project loans from 33 lenders financing Kaisa Group’s projects, governed by laws of China.

Events Prior to Restructuring

Kaisa Group’s restructuring efforts were precipitated by a number of unforeseen challenges beginning in December 2014 that caused disruption to the company’s business and created an “acute liquidity pressure.” At that time, after Kaisa Group became entangled in an anti-corruption probe, governmental authorities in Shenzhen, China blocked certain of the Company’s sale and purchase agreements and imposed other restrictions in relation to real estate projects being developed by Kaisa Group. As a result, the company was forced to sell assets at low prices to ease the liquidity crisis, and a number of Kaisa Group’s onshore creditors took legal action, including set-off and pursuing judicial freeze of the company’s assets.

Between November 2014 and February 2015, the company’s cash collections on real estate investment properties dropped from $343 million to $23 million. While the governmental blockages related to the unsold properties were subsequently lifted, the orders granting freezing of assets in China remained. The liquidity pressure with which Kaisa Group was faced resulted in Kaisa Holdings becoming the first Chinese developer to default on its offshore obligations. Following its default, the holding company’s 2018 notes traded at a severe loss—29.6 cents on the dollar.11

Restructuring Efforts

Kaisa Group’s restructuring efforts began in February 2015, when it hired Houlihan Lockey (China) Limited and certain other Hong Kong-based advisors to assist in designing and effectuating a restructuring plan. Kaisa Group’s onshore and offshore creditors were receptive to negotiations and hired other Hong Kong-based advisors to participate in negotiating a potential out-of-court restructuring of onshore debt, and a scheme of arrangement to restructure offshore debt. A scheme of arrangement is a proceeding which is not an insolvency proceeding, and during which management retains control over the company and its operations. As in the U.K., schemes of arrangement are an effective restructuring regime as a scheme enables a company to bind dissenters or hold-outs. Over a year later, a restructuring proposal that ultimately received support of creditors holding approximately 96.25 percent of aggregate value of affected offshore obligations emerged. On March 24, 2016, Kaisa Holdings filed an application with the Hong Kong Court seeking an order sanctioning the negotiated scheme of arrangement to restructure certain offshore obligations.

A similar proceeding seeking approval of a parallel, inter-conditional scheme was commenced before the Grand Court of the Cayman Islands, to ensure recognition of the restructuring in the jurisdiction in which Kaisa Holdings was organized. Separately, Kaisa Group reached restructuring agreements with the majority of its onshore creditors. As of the date of the recognition petition, approximately 90 percent of Kaisa Group’s outstanding obligations to onshore creditors had been either subject to restructuring agreements, repaid, or returned to loans in good standing. The onshore debt is not subject of the Hong Kong, Cayman or any other judicial restructuring.

The restructuring plan proposed in Hong Kong relates to $3 billion in offshore debt, more than $2 billion of which is governed by New York law. Overall, Kaisa group has approximately $14.9 billion in debt, with $8 billion of that debt concentrated in China and related to specific real estate projects various of Kaisa Group’s subsidiaries are involved in, backed by $16.1 billion of assets. The Hong Kong restructuring scheme seeks to replace the Kaisa Holdings’ existing bond debt with new bonds, which will average 4.8 years in maturities, and will have lower cash coupons in early years, with a “PIK” or payment in kind feature for interest. After the proposed restructuring plan gained support of the creditors, the trading price for the debt jolted back up to around 80 cents on the dollar.12

Chapter 15 Recognition

On May 5, 2016, the company filed a petition with the Southern District of New York Bankruptcy Court seeking recognition of the Hong Kong Proceeding under Chapter 15. According to the pleadings filed in support of the petition for recognition, the company sought Chapter 15 recognition to prevent “piecemeal attack by individual creditors in future U.S. litigation, thereby ensuring an equitable distribution to Kaisa’s offshore creditors through the Hong Kong proceeding” and because “[a]bsent recognition, Kaisa’s ability to administer its assets pursuant to an orderly arrangement may be materially compromised.”13

The Bankruptcy Court granted recognition of the Hong Kong Proceeding as the foreign main proceeding by order dated June 3, 2016.14 On June 10, 2016, the company reported that both the Cayman and Hong Kong schemes were sanctioned by the respective court where each proceeding was pending.15

U.S. Bondholders Interests

Defaults on onshore and offshore obligations by companies in Greater China, as well as other Emerging Markets, have been increasing.16 Restructuring of this debt via a scheme of arrangement in tandem with a U.S. bankruptcy case may present an effective restructuring mechanism for Emerging Market enterprises. Indeed, Pacific Exploration, an enterprise with over $5.3 billion in U.S. dollar-denominated bonds governed by New York law and its primary operating assets in Colombia, was restructured through a Canadian CCAA proceeding, made effective through commencing a Chapter 15 case.17 The level of creditor support in both situations suggests that the overwhelming number of bondholders were satisfied with the result. However, this may not always be the case.

As the effectiveness of Hong Kong schemes of arrangement over Chinese enterprises is confirmed, the ability to effect a change of control should emerge as a logical development to deleverage the enterprise and improve the operation. One can convert debt to equity through a scheme. It also remains to be seen whether the interests of U.S. bondholders will be protected in the event there is a substantial dissent and a cognizable departure from what would be permissible in a Chapter 11. Ironically it was the ability to enforce a restructuring against U.S. bondholders, relying on Chapter 15, that made the near local effort in Hong Kong using a scheme of arrangement attractive.

Endnotes:

1. Scott Lanman, “IMF Urges China to Tackle ‘High’ Corporate Debt Immediately,” BLOOMBERG (June 10, 2016), http://www.bloomberg.com/news/articles/2016-06-11/imf-urges-china-to-tackle-high-corporate-debt-immediately. See generally INTERNATIONAL MONETARY FUND, GLOBAL FINANCIAL STABILITY REPORT: POTENT POLICIES FOR SUCCESSFUL NORMALIZATION (April 2016).

2. See Corinne Ball, “Emerging Markets: the Next Frontier for Distress M&A,” N.Y.L.J., Dec. 24, 2015.

3. Throughout this article, “Kaisa Group” or the “Company” shall refer to the enterprise, consisting of Kaisa Group Holdings Ltd., which is the ultimate parent (Kaisa Holdings), and the international group of its subsidiaries.

4. Tiffany Kary, Dawn McCarty, “Kaisa Seeks U.S. Bankruptcy Court Aid in Hong Kong Debt Plan,” BLOOMBERG (May 5, 2016), http://www.bloomberg.com/news/articles/2016-05-05/kaisa-seeks-u-s-bankruptcy-court-aid-in-hong-kong-restructuring.

5. In re Kaisa Group Holdings, Case No. 16-11303-shl, U.S. Bankruptcy Court, Southern District of New York. This proceeding did not seek recognition of the parallel restructuring proceeding pending before the Grand Court of the Cayman Islands, but petitioner reserved the right to seek recognition of the Cayman Proceeding at a later date.

6. Lisa Pham, “Kaisa Says Cayman, H.K. Courts Approve Restructuring Petitions,” BLOOMBERG LAW (June 10, 2016), https://www.bloomberglaw.com/s/news/e13a318c772daa0bf04ea050b3d660a3/document/O8JYIY6JIJUQ?headlineOnly=false.

7. See Jethro Mullen, “China Posts Slowest Annual Economic Growth in 25 Years,” CNN MONEY (Jan. 19, 2016), http://money.cnn.com/2016/01/18/news/economy/china-2015-gdp-growth/index.html. David Lipton, the IMF’s first deputy managing director recently warned the audience at an economic conference in Shenzhen, China that, “Corporate debt remains a serious—and growing—problem that must be addressed immediately and with a commitment to serious reforms.” Lanman, supra note 1.

8. Lianting Tu, David Yong, “China Default Silver Linings Seen in 100%-Plus Returns on Kaisa,” BLOOMBERG (June 7, 2016), http://www.bloomberg.com/news/articles/2016-06-07/china-default-silver-linings-seen-in-100-plus-returns-on-kaisa.

9. Denise Wee, “More Chinese Bond Defaults Expected,” NIKKEI ASIAN REVIEW (Dec. 24, 2015), http://asia.nikkei.com/Markets/Capital-Markets/More-Chinese-bond-defaults-expected.

10. Unless an alternate citation is provided, all factual background about the Company’s restructuring efforts was obtained from the Verified Petition Under Chapter 15 for Recognition, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 2 (Bankr. S.D.N.Y. May 5, 2016), and the Declaration of Dr. Tam Lai Ling in Support of Verified Petition, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 3 (Bankr. S.D.N.Y. May 5, 2016).

11. Tu & Yong, supra note 8.

12. Id.

13. Declaration of Dr. Tam Lai Ling, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 3, ¶¶ 83-84 (Bankr. S.D.N.Y. May 5, 2016).

14. Order Recognizing Foreign Main Proceeding and Granting Related Relief, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 15 (Bankr. S.D.N.Y. June 3, 2016).

15. Lisa Pham, supra note 6.

16. Tracy Alloway, “China’s Debt Load Is (Much) Higher Than Previously Thought, Goldman Says,” BLOOMBERG (June 6, 2016), http://www.bloomberg.com/news/articles/2016-06-06/china-s-debt-load-is-much-higher-than-previously-thought-goldman-says.

17. Verified Petition, In re Pacific Exploration & Production Corporation, 16-11189-jlg, ECF No. 3. (Bankr. S.D.N.Y. April 29, 2016).

The debt load in China, and in Emerging Markets generally, has been in the news lately with amounts of debt anticipated to go into default reaching an estimated $1.3 trillion.1 Much of this debt is “offshore,” meaning bonds issued by a corporate holding company organized in a what may have been described as a tax haven, such as the British Virgin Islands or the Cayman Islands, which are subject to New York law as a choice of law and typically denominated in U.S. dollars. This offshore debt is often widely held. While the choice of law suggests that the United States and New York , in particular, should be the forum for restructuring, the domicile of the issuer and the forum of the enterprise operations are also available choices. In contrast to the “offshore debt” issued by a holding company, the debt issued by the entity owning the operations is referred to as the “onshore” debt. A default on the “offshore” debt may not affect the operations. Creditor remedies are limited, and local insolvency regimes are untested or ineffective. Indeed, borrowers likely will not undertake a restructuring unless and until there is a disruption (such as a liquidity crisis) at the operating level. Rather than the multi-billion default at the holding company level, it is the need for new money onshore, as well as avoiding enforceable defaults under onshore debt, that cause a court-centered restructuring of the offshore debt.2

At least one situation has confirmed the expectation. In choosing a jurisdiction for its restructuring, rather than rely upon the forum identified in the debt documents as the choice of law to address the obligations under the bonds, the holding company at the helm of a global enterprise relied upon the jurisdictions of its domicile and where it was listed. This enterprise is a Chinese real estate developer Kaisa Group.3 Kaisa Group owns various heavily-leveraged real estate developments in China through a series of entities. It financed its operations through “offshore” and “onshore” debt. The operating entity debt was described as “onshore” debt. To provide additional acquisition capital, Kaisa Group, through its Cayman-domiciled holding company, Kaisa Holdings, which is listed on the Hong Kong exchange, issued bond debt, predominately governed by New York law, denominated in U.S. dollars, primarily to U.S.-based investors. This debt was referred to as “offshore debt.”

Kaisa Holdings became one of the first Chinese real estate developers to default on dollar bonds last year, after it failed to pay the coupons on two securities.4 To remedy the default, which was brought on by an unexpected liquidity crisis, the company sought to reorganize both the “onshore” and “offshore” debt. The “onshore” debt was restructured out of court, and the offshore debt was restructured through schemes of arrangement in the forum of domicile (the Grand Court of the Cayman Islands) and the forum closest to the forum in which the operations are located and where the company’s administrative functions are carried out (the High Court of Hong Kong). To assure the effectiveness of the schemes, and take advantage of the bankruptcy court stay and thereby prevent U.S.-based creditors from commencing collection actions against the company in the United States, Kaisa Holdings commenced a Chapter 15 proceeding in the Bankruptcy Court for the Southern District of New York . The bankruptcy court granted recognition earlier this month.5 The recognition order, entered on June 3, 2016, allows Kaisa Holdings to go forward with implementing the Hong Kong and the Cayman Islands schemes that were sanctioned by the Hong Kong and the Cayman Island Courts, respectively, shortly after the recognition order was entered.6

Kaisa Holdings’ default and the company’s global restructuring efforts may provide insight, if not a template, for many other Chinese companies that are heavily leveraged, having issued onshore debt, as well as offshore corporate bonds, and suffering due to China’s economic slowdown and the strength of the dollar.7 At least 17 Chinese companies have defaulted onshore, and four companies defaulted on offshore liabilities in the last two years.8 The coming year promises to be challenging for a number of Chinese enterprises organized through a holding company, often domiciled in the Cayman Islands or the British Virgin Islands, with operations in China, generally through Chinese subsidiaries, to refinance their debts, since a wave of offshore high-yield debt issues by Chinese businesses is expected to mature in the near future.9 The anticipated magnitude of that trend suggests that available restructuring approaches may also become a vehicle to effect a change of control upon default. The relatively new and little used insolvency regime in China is not expected to yield predictable results. Hence, Kaisa Group’s restructuring, because it is consummated under a well understood and widely recognized approach—a scheme of arrangement in tandem with a U.S. bankruptcy case—merits attention.

Background10

Kaisa Holdings is a Cayman Islands-domiciled parent of an international group of companies incorporated in China, Hong Kong, the British Virgin Islands and the Cayman Islands, which are engaged primarily in development of large-scale residential properties in China, as well as development and management of hotels, shopping malls and catering services, whose operations span 30 cities in five regions in China. While Kaisa Holdings is incorporated under the Cayman Islands Companies Law, its principal place of business is in Hong Kong and it is listed on the Stock Exchange of Hong Kong.

Kaisa Holdings undertook a number of offshore financing transactions, which currently include (1) global mostly U.S.-dollar denominated high yield notes issued by Kaisa Holdings between 2012 and 2014 and governed by New York law with maturity dates ranging from April 22, 2016 to Jan. 8, 2020, (2) 1.5 billion U.S. dollar-settled convertible bonds issued by Kaisa Holdings in 2010 and due on Dec. 20, 2015, and (3) several existing offshore loans. Onshore, there were approximately 84 project loans from 33 lenders financing Kaisa Group’s projects, governed by laws of China.

Events Prior to Restructuring

Kaisa Group’s restructuring efforts were precipitated by a number of unforeseen challenges beginning in December 2014 that caused disruption to the company’s business and created an “acute liquidity pressure.” At that time, after Kaisa Group became entangled in an anti-corruption probe, governmental authorities in Shenzhen, China blocked certain of the Company’s sale and purchase agreements and imposed other restrictions in relation to real estate projects being developed by Kaisa Group. As a result, the company was forced to sell assets at low prices to ease the liquidity crisis, and a number of Kaisa Group’s onshore creditors took legal action, including set-off and pursuing judicial freeze of the company’s assets.

Between November 2014 and February 2015, the company’s cash collections on real estate investment properties dropped from $343 million to $23 million. While the governmental blockages related to the unsold properties were subsequently lifted, the orders granting freezing of assets in China remained. The liquidity pressure with which Kaisa Group was faced resulted in Kaisa Holdings becoming the first Chinese developer to default on its offshore obligations. Following its default, the holding company’s 2018 notes traded at a severe loss—29.6 cents on the dollar.11

Restructuring Efforts

Kaisa Group’s restructuring efforts began in February 2015, when it hired Houlihan Lockey (China) Limited and certain other Hong Kong-based advisors to assist in designing and effectuating a restructuring plan. Kaisa Group’s onshore and offshore creditors were receptive to negotiations and hired other Hong Kong-based advisors to participate in negotiating a potential out-of-court restructuring of onshore debt, and a scheme of arrangement to restructure offshore debt. A scheme of arrangement is a proceeding which is not an insolvency proceeding, and during which management retains control over the company and its operations. As in the U.K., schemes of arrangement are an effective restructuring regime as a scheme enables a company to bind dissenters or hold-outs. Over a year later, a restructuring proposal that ultimately received support of creditors holding approximately 96.25 percent of aggregate value of affected offshore obligations emerged. On March 24, 2016, Kaisa Holdings filed an application with the Hong Kong Court seeking an order sanctioning the negotiated scheme of arrangement to restructure certain offshore obligations.

A similar proceeding seeking approval of a parallel, inter-conditional scheme was commenced before the Grand Court of the Cayman Islands, to ensure recognition of the restructuring in the jurisdiction in which Kaisa Holdings was organized. Separately, Kaisa Group reached restructuring agreements with the majority of its onshore creditors. As of the date of the recognition petition, approximately 90 percent of Kaisa Group’s outstanding obligations to onshore creditors had been either subject to restructuring agreements, repaid, or returned to loans in good standing. The onshore debt is not subject of the Hong Kong, Cayman or any other judicial restructuring.

The restructuring plan proposed in Hong Kong relates to $3 billion in offshore debt, more than $2 billion of which is governed by New York law. Overall, Kaisa group has approximately $14.9 billion in debt, with $8 billion of that debt concentrated in China and related to specific real estate projects various of Kaisa Group’s subsidiaries are involved in, backed by $16.1 billion of assets. The Hong Kong restructuring scheme seeks to replace the Kaisa Holdings’ existing bond debt with new bonds, which will average 4.8 years in maturities, and will have lower cash coupons in early years, with a “PIK” or payment in kind feature for interest. After the proposed restructuring plan gained support of the creditors, the trading price for the debt jolted back up to around 80 cents on the dollar.12

Chapter 15 Recognition

On May 5, 2016, the company filed a petition with the Southern District of New York Bankruptcy Court seeking recognition of the Hong Kong Proceeding under Chapter 15. According to the pleadings filed in support of the petition for recognition, the company sought Chapter 15 recognition to prevent “piecemeal attack by individual creditors in future U.S. litigation, thereby ensuring an equitable distribution to Kaisa’s offshore creditors through the Hong Kong proceeding” and because “[a]bsent recognition, Kaisa’s ability to administer its assets pursuant to an orderly arrangement may be materially compromised.”13

The Bankruptcy Court granted recognition of the Hong Kong Proceeding as the foreign main proceeding by order dated June 3, 2016.14 On June 10, 2016, the company reported that both the Cayman and Hong Kong schemes were sanctioned by the respective court where each proceeding was pending.15

U.S. Bondholders Interests

Defaults on onshore and offshore obligations by companies in Greater China, as well as other Emerging Markets, have been increasing.16 Restructuring of this debt via a scheme of arrangement in tandem with a U.S. bankruptcy case may present an effective restructuring mechanism for Emerging Market enterprises. Indeed, Pacific Exploration, an enterprise with over $5.3 billion in U.S. dollar-denominated bonds governed by New York law and its primary operating assets in Colombia, was restructured through a Canadian CCAA proceeding, made effective through commencing a Chapter 15 case.17 The level of creditor support in both situations suggests that the overwhelming number of bondholders were satisfied with the result. However, this may not always be the case.

As the effectiveness of Hong Kong schemes of arrangement over Chinese enterprises is confirmed, the ability to effect a change of control should emerge as a logical development to deleverage the enterprise and improve the operation. One can convert debt to equity through a scheme. It also remains to be seen whether the interests of U.S. bondholders will be protected in the event there is a substantial dissent and a cognizable departure from what would be permissible in a Chapter 11. Ironically it was the ability to enforce a restructuring against U.S. bondholders, relying on Chapter 15, that made the near local effort in Hong Kong using a scheme of arrangement attractive.

Endnotes:

1. Scott Lanman, “IMF Urges China to Tackle ‘High’ Corporate Debt Immediately,” BLOOMBERG (June 10, 2016), http://www.bloomberg.com/news/articles/2016-06-11/imf-urges-china-to-tackle-high-corporate-debt-immediately. See generally INTERNATIONAL MONETARY FUND, GLOBAL FINANCIAL STABILITY REPORT: POTENT POLICIES FOR SUCCESSFUL NORMALIZATION (April 2016).

2. See Corinne Ball, “Emerging Markets: the Next Frontier for Distress M&A,” N.Y.L.J., Dec. 24, 2015.

3. Throughout this article, “Kaisa Group” or the “Company” shall refer to the enterprise, consisting of Kaisa Group Holdings Ltd., which is the ultimate parent (Kaisa Holdings), and the international group of its subsidiaries.

4. Tiffany Kary, Dawn McCarty, “Kaisa Seeks U.S. Bankruptcy Court Aid in Hong Kong Debt Plan,” BLOOMBERG (May 5, 2016), http://www.bloomberg.com/news/articles/2016-05-05/kaisa-seeks-u-s-bankruptcy-court-aid-in-hong-kong-restructuring.

5. In re Kaisa Group Holdings, Case No. 16-11303-shl, U.S. Bankruptcy Court, Southern District of New York . This proceeding did not seek recognition of the parallel restructuring proceeding pending before the Grand Court of the Cayman Islands, but petitioner reserved the right to seek recognition of the Cayman Proceeding at a later date.

6. Lisa Pham, “Kaisa Says Cayman, H.K. Courts Approve Restructuring Petitions,” BLOOMBERG LAW (June 10, 2016), https://www.bloomberglaw.com/s/news/e13a318c772daa0bf04ea050b3d660a3/document/O8JYIY6JIJUQ?headlineOnly=false.

7. See Jethro Mullen, “China Posts Slowest Annual Economic Growth in 25 Years,” CNN MONEY (Jan. 19, 2016), http://money.cnn.com/2016/01/18/news/economy/china-2015-gdp-growth/index.html. David Lipton, the IMF’s first deputy managing director recently warned the audience at an economic conference in Shenzhen, China that, “Corporate debt remains a serious—and growing—problem that must be addressed immediately and with a commitment to serious reforms.” Lanman, supra note 1.

8. Lianting Tu, David Yong, “China Default Silver Linings Seen in 100%-Plus Returns on Kaisa,” BLOOMBERG (June 7, 2016), http://www.bloomberg.com/news/articles/2016-06-07/china-default-silver-linings-seen-in-100-plus-returns-on-kaisa.

9. Denise Wee, “More Chinese Bond Defaults Expected,” NIKKEI ASIAN REVIEW (Dec. 24, 2015), http://asia.nikkei.com/Markets/Capital-Markets/More-Chinese-bond-defaults-expected.

10. Unless an alternate citation is provided, all factual background about the Company’s restructuring efforts was obtained from the Verified Petition Under Chapter 15 for Recognition, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 2 (Bankr. S.D.N.Y. May 5, 2016), and the Declaration of Dr. Tam Lai Ling in Support of Verified Petition, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 3 (Bankr. S.D.N.Y. May 5, 2016).

11. Tu & Yong, supra note 8.

12. Id.

13. Declaration of Dr. Tam Lai Ling, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 3, ¶¶ 83-84 (Bankr. S.D.N.Y. May 5, 2016).

14. Order Recognizing Foreign Main Proceeding and Granting Related Relief, In re Kaisa Group Holdings, 16-11303-shl, ECF No. 15 (Bankr. S.D.N.Y. June 3, 2016).

15. Lisa Pham, supra note 6.

16. Tracy Alloway, “China’s Debt Load Is (Much) Higher Than Previously Thought, Goldman Says,” BLOOMBERG (June 6, 2016), http://www.bloomberg.com/news/articles/2016-06-06/china-s-debt-load-is-much-higher-than-previously-thought-goldman-says.

17. Verified Petition, In re Pacific Exploration & Production Corporation, 16-11189-jlg, ECF No. 3. (Bankr. S.D.N.Y. April 29, 2016).