R&F Wins Extension on $5.1B in Bonds in Asia’s Largest Real Estate Debt Restructuring

Guangzhou R&F said on Monday that it has won approval from holders of 10 sets of offshore bonds to restructure the terms of the debt obligations and give the financially troubled mainland developer additional time to pay off the notes.

In a statement to the Singapore exchange, R&F’s Easy Tactic Ltd unit said that, at meetings held on Monday, it had received the requisite consent to amend the terms on bonds now carrying a face value of $5.1 billion, granting the developer a reprieve on payments due on Wednesday.

The deal, which marks the largest successful restructuring of public real estate debt in Asia, was arranged by JP Morgan and pushes out the maturity date on the entirety of Guangzhou R&F’s offshore debt by an average of three to four years for bonds which had been set to mature over the next two years.

“Everyone wants to resolve the problem – both creditors and the borrower,” Rita Chan, head of real estate investment banking for Asia (excluding Japan) told Mingtiandi. “Investors want to move forward and to allow the company to focus on their operations.”

Thumbs Up for Project Shuffle

Agreeing to a proposal named “Project Shuffle” which was first presented on 17 June, Guangzhou R&F’s offshore creditors consented to have the 10 outstanding bonds condensed into three tranches, with Group A made up of $1.3 billion in notes maturing this year, Group B composed of $2.2 billion in bonds dues in 2023 and Group C representing $1.6 billion in 2024 instruments.

In addition to giving the developer more time, the creditors agreed to have the coupon rate on all of the bonds set to 6.5 percent, with R&F having an option to pay in kind at 7.5 percent during the first 18 months. While the new notes amount to $5.1 billion in total after allowing for consent fees of 0.5 percent – up from the earlier $4.94 billion in combined value – the original notes had carried coupon rates of from 5.75 percent to 12.375 percent.

To sweeten the deal, R&F promised that, should it be able to dispose of its R&F Princess Cove project in Johor Bahru, Malaysia or its London ONE project in the UK capital (formerly known as One Nine Elms), or achieve sales at the properties, that it would use the net proceeds to partially refinance the notes.

Gaining acceptance for Project Shuffle required securing consent from holders of at least 75 percent of the notes in each tranche, with the owners of all ten sets approving the proposal. R&F had avoided a default on a set of $750 million in bonds in January of this year when it won approval from investors to extend the maturity of the majority of those notes to this week.

“The overall objective is a speedy resolution, but instead of just addressing the next upcoming maturity, they wanted to give investors some clarity,” JP Morgan’s Chan said of R&F’s decision to take on all of its offshore obligations in a single transaction.

Critical to the deal was R&F’s commitment to completing the £1 billion ($1.2 billion) London project which had seen contractors walk off the job earlier this year due to lack of payment. In June R&F struck a deal with Précis Capital Partners backed by a consortium of lenders including funds managed by Apollo Global Management and Carlyle Group’s Crosstree Real Estate Partners, which provided £770 million in fresh funding for the development.

Few Alternatives

Had the bond holders not consented to R&F’s proposal, the company had presented an alternate scheme which would have collapse d all 10 sets of notes into a single tranche with a maturity of six years and a coupon rate of 6.5 percent.

While R&F did not specify a timetable for the alternate scheme, Beijing-based developer Modern Land struck a similar deal with its creditors in March, with that restructuring expected to be completed this month.

A complete list of R&F’s offshore creditors was not made available, however, in a statement to the Hong Kong exchange today, investment holding firm Chuang’s Consortium International said that, as part of the note exchange, it had acquired new R&F notes to be issued on 12 July 2022 in the aggregate principal amount of about $50.6 million.

Chuang’s said that the new bonds, which will mature in July 2025, instead of this month, bear interest of up to 7.5 percent, including the payment in kind option, compared to the 5.75 percent rate on the earlier notes.

In March of this year, R&F said that it expected to record a net loss of not less than RMB 8 billion ($1.3 billion) for 2021, however, the company has repeatedly delayed the release of its financial reports for last year.

Earlier this month the company said that it had received permission from the Hong Kong stock exchange to extend the deadline for issuing its annual report to 19 August of this year, with its annual general meeting to be held in September.