Los Angeles-based Oaktree Capital Management has stormed a Hong Kong “castle” valued at $1 billion.
The global asset management firm has seized a 2.2 million-square-foot plot known as “Project Castle,” where the chairman of China Evergrande Group hoped to construct a colossal mansion, the Financial Times reported.
The move to seize control of the asset this week sank a plan by Evergrande to restructure $20 billion in offshore debts.
The seizure, made through a receiver, came after the struggling Chinese developer defaulted on a loan against which the $166-billion asset manager had security, according to two people familiar with the matter
The 2.2 million square-foot project was key collateral in a planned restructuring of Evergrande’s giant offshore debt load, according to one of the people. But the plan is now in disarray after Oaktree appointed a receiver.
The appointment of the receiver must be approved by a Hong Kong court, after which the asset would be removed from the general restructuring of Evergrande.
Such a turn of events could complicate Evergrande’s attempts to restructure.
“Evergrande has got the offshore bondholders to stop making noise on the basis there’s a restructuring process coming soon,” said this person. “That land was going to be used to facilitate the restructuring.”
The Evergrande debt restructuring would be the biggest in China’s history. The company has scrambled to reassure creditors after a series of defaults since its finances spiraled down last year.
Investors on international bond markets, where Evergrande has borrowed about $20 billion of its more than $300 billion in total liabilities, have focused on its offshore assets, including listed subsidiaries in Hong Kong, according to the Financial Times.
Evergrande has tried to sell its massive Hong Kong project, reported to be valued at about $1 billion, as part of its plan to offload non-core assets to minimize losses for creditors.
Oaktree co-founder Howard Marks, a former disciple of “junk bond king” Michael Milken, is known as one of the keenest investors in distressed securities.
In December 2020, the billionaire head of the Downtown-based firm, now a unit of Brookfield Properties, and his wife Nancy paid $26.2 million for a 11,500-square-foot mansion in Holmby Hills. Last fall, the company bought a retail condo in New York’s SoHo for $34 million.
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