Guangzhou R&F’s business appears to be stalling out
A builder once ranked among China’s largest developers has fallen still further into distress with Guangzhou R&F Properties announcing on Sunday that it has failed to make interest payments on offshore bonds worth a total of $4.53 billion.
The developer helmed by Hong Kong businessman Li Sze-lim informed the Hong Kong exchange that its Easy Tactic Ltd unit had failed to make interest payments totalling $147.1 million by their due date on 11 July, and had not made good on its obligations within a 30-day grace period, putting it into default.
“The Company is in discussions with the holders of the Easy Tactic Notes for an amicable solution and will continue to closely monitor the situation and consider all possible actions including but not limited to the formulation of a holistic liability management solution in respect of the Group’s offshore debts,” Guangzhou R&F said in the statement.
To assist with finding a solution, the company said that it has hired the industry’s standard set of restructuring specialists, with Alvarez & Marsal Corporate Finance Limited now acting as financial advisor and Sidley Austin as legal advisor.
Restructuring Experience
Guangzhou’s latest financial flop comes despite a series of restructuring attempts and multiple asset sales, as the company continues to see its mainland condo sales business collapse. After selling RMB 13.54 billion in homes during the first six months of 2023, Guangzhou R&F found buyers for just RMB 5.6 billion in housing during the same period of this year, a decline of nearly 59 percent, according to company statements.
“The Company will work with its advisors to explore comprehensive and feasible solutions, which ensure a fair treatment to all creditors, with a view to securing the long-term future development of the Group for the benefit of all stakeholders,” R&F said in its statement.
The company asked for support and cooperation from its creditors as it seeks a holistic solution to it financial challenges, however, it may be seeking to tap a depleted source after multiple restructuring maneuvers in recent months and years.
In 2022, the developer had worked with JP Morgan to win bondholder approval to extend $5.1 billion in Easy Tactic bonds in what was Asian’s largest restructuring of real estate debt ever.
In April of this year the company won approval from bondholders to remove covenants and undertakings on $5.7 billion worth of Easy Tactic offshore notes so that it could sell a London project to an entity controlled by CC Land chairman Cheung Chung-kiu, in an attempt to replenish its liquidity.
Challenges Mount
Guangzhou R&F’s finances began to look more challenging last month as a unit of Singapore state investment firm Temasek Holdings filed a wind-up petition against one of its subsidiaries in Hong Kong, seeking to collect on an outstanding loan and interest worth a total of $613.66 million.
In addition to its sale to CC Land’s chairman, R&F in May was reported to have sold its Vauxhall Square project in London to a Middle Eastern investor for an undisclosed amount. The company had earlier sold the same project to Hong Kong’s Far East Consortium and later to an investment firm backed by New World Development chief executive Adrian Cheung, only to see those deals reversed or abandoned.
At its current business trajectory, Guangzhou R&F is in danger of falling behind its 2012 sales total of RMB 30.4 billion, when it ranked tenth among China’s largest developers by contracted sales. In 2023 the company failed to place within the country’s top 20 builders by the same measure.
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