R&F Avoids Default on $750M Note With Scaled-Back Repurchase Plan

Guangzhou R&F Properties has escaped default on a $750 million offshore note coming due this week, even as liquidity issues forced the mainland developer to downsize a planned buyback of some of the debt.

R&F Properties had intended to earmark $300 million in funds for the repurchase of the notes maturing on Thursday. But “a number of unexpected events”, including a failed pair of asset sales, left R&F with just $104 million to spare for the purchase price, related interest and consent fee, the group said Tuesday in a filing with the Hong Kong stock exchange.

The noteholders have nonetheless agreed to a six-month extension of repayment, setting a due date of 13 July for the cash-strapped developer to pony up the remaining principal amount of $608.6 million.

“Despite the continuing volatility in the property sector in China, the group is continuing to take active measures to shore up its liquidity position and to work on generating offshore cash flow to meet its offshore financial commitments,” said R&F Properties, whose HKEX-listed shares fell 3.5 percent on Wednesday as investors absorbed the news.

Disposals Left Hanging

The Guangzhou-based builder had warned last week that the funds available to settle its tender offer for the offshore notes would be “materially less” than the anticipated $300 million after sales of the unspecified assets fell through.

In early December, US private equity giant Blackstone agreed to acquire the remaining 30 percent interest it did not already own in the developer’s Guangzhou International Airport R&F Integrated Logistics Park for RMB 3.4 billion ($540 million).

R&F Properties said at the time that selling out of its logistics park would enable the group “to address its near term maturities, including but not limited to offshore senior notes”. An announcement has yet to be made about completion of the disposal to Blackstone, which acquired its 70 percent stake in the park last January for $1.1 billion.

Hoping to escape a debt-squeeze scenario made famous by its cross-town rivals at China Evergrande Group, R&F Properties has been pulling out the stops to service its liabilities, which include RMB 18 billion in capital-market debt maturing or becoming puttable in 2022.

In September, R&F’s controlling shareholders, chairman Li Sze-lim and vice chair Zhang Li, worked out a pair of deals that allowed them to loan HK$8 billion ($1.03 billion) to the developer, while potentially pocketing HK$2 billion in change.

Losing by Default

While R&F’s manoeuvres allowed it to dodge default this time, some rival developers have been less fortunate.

After missing $82.5 million in overdue payments on two dollar bonds in early December, Evergrande set up a “risk management committee” to begin working through an offshore debt pile approaching $20 billion.

A few weeks later, Kaisa Group Holdings acknowledged its failure to make payments on three sets of offshore senior notes and confirmed that it had engaged restructuring advisors to work with creditors on a plan for $11.8 billion in outstanding dollar bonds.

Last week, Reuters revealed that Shimao Group had defaulted on a trust loan after missing a RMB 645 million ($101 million) payment.

Shimao and one of its onshore units are also on the hook for $376 million in bond payments due this week, Bloomberg reported, while bondholders will vote Thursday on whether to grant Evergrande a six-month payment extension for a RMB 4.5 billion onshore bond that matured last Saturday.