SYDNEY/HONG KONG, Feb 27 (Reuters) - Global restructuring specialists Alvarez & Marsal and Houlihan Lokey have boosted headcount in Hong Kong as China's property crisis results in a surge in debt restructuring deals - making them a rare bright spot in hiring for the city's financial sector.

China's property industry, a key pillar of the world's second-largest economy, has lurched from one crisis to another since 2021 after a regulatory crackdown on debt-fuelled construction triggered a liquidity squeeze.

According to a Reuters tally, around 20 Hong Kong-listed Chinese real estate developers have defaulted on dollar bonds which would require them to enter into restructuring talks with creditors or face liquidation.

Alvarez & Marsal, which saw two of its managing directors appointed last month by a Hong Kong court to liquidate property giant China Evergrande Group, said its China business had about 260 staff as of end-January, up from about 200 a year ago.

It declined to provide a breakdown of its hiring but industry sources with direct knowledge of the matter said the New York-based firm had been building up its restructuring and corporate performance units. The sources were not authorised to speak to media and declined to be identified.

Houlihan has advised Evergrande as well as Sunac China - the first Chinese developer to complete an offshore debt revamp in the wake of the crisis. It said its team in Hong Kong and China has expanded over the past two-and-a-half years.

"Over this period, the team has grown by more than 50%. We believe there is opportunity for continued growth in China and we are actively recruiting for four additional team members at the moment," a spokesperson said without giving a specific number.

Demand for debt restructuring professionals has seen a significant uptick since the beginning of 2023 and the trend is expected to continue this year, said Chris Corcoran, financial services senior manager at headhunter Robert Walters.

"It feels like a week doesn't go by where there isn't another story about a large company considering some form of restructuring," he said, adding that this was occurring across various sectors.

Additionally, U.S. law firm Sidley Austin said it now has seven lawyers in Asia in its restructuring practice which was created in the past couple of years. The team works alongside its four capital market partners in Asia, it added.

The hiring by restructuring specialist firms contrasts with the numerous investment banking jobs being cut in Hong Kong and on the Chinese mainland - cuts that are expected to gather pace this year due to deepening economic and market gloom in China.

That gloom has contributed to a sharp plunge in Hong Kong and mainland stock market and deal activity, weighing on the city's prospects as a regional financial hub.

REWARDS

Winning a restructuring deal usually means handsome fees.

Advisors employed by restructuring companies and bondholder groups are paid monthly retainers, milestone payments when specific stages are achieved, and success payments when the deal is completed.

In the case of property developer China Aoyuan, whose $6 billion offshore debt restructuring deal went into effect last month, fees for its nine legal advisers and counsel including Linklaters came to a total of $16 million, according to filings.

Fees for its financial advisers - KPMG, Deloitte and Admiralty Harbour - were $11.7 million, the documents showed.

Due to the uncertainty and complexity involved in these deals, however, so-called success payments may not eventuate.

After close to two years of negotiations, Evergrande and its bondholder group's advisors are not able to receive these payments because the company was ordered into liquidation. (Reporting by Scott Murdoch in Sydney and Clare Jim in Hong Kong; Editing by Sumeet Chatterjee and Edwina Gibbs)