China property debt crisis: R&F warns its asset sales may not meet bond repurchase deadline in a slumping real estate market

The Guangzhou-based developer said proceeds from some asset sales may fail to materialise by January 10 for repurchasing notes from offshore bondholders

Creditors holding almost 72 per cent of theUS$725 million bonds vote for 17 per cent discount on principal to receive proceeds earlier

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The design by Guangzhou R&F Properties for the new Kai Tak Sports Park in Hong Kong, featuring a retractable natural grass pitch. The pitch ultimately was won by New World Development. Photo: SCMP Pictures.

Published: 5:00pm, 6 Jan 2022

Guangzhou R&F Properties said it may not be able to sell assets in time to buy back some of its offshore bonds, as one of China’s largest and most indebted developers struggles to meet its debt obligations amid a sinking real estate market.

The actual amount of funds that can be received from selling certain assets may be less than the previous estimate of US$300 million, R&F said.

“Due to the continued volatility in the property sector in China, proceeds from certain asset sales contemplated by [R&F] may fail to materialise” by the January 10 deadline to buy back some of its US$725 million dollar bonds, the Guangzhou-based developer said in a filing to the Hong Kong stock exchange, adding that it’s postponing the settlement date to January 12. Still, the company is “continuing to take active measures to shore up its liquidity position up to the settlement date,” R&F said.

China’s sales of new homes topped 1,699 units during the New Year holiday, a contraction of 57 per cent from the same period in 2021, marking the lowest transactions volume in five years, according to Zhuge Zhaofang, an online property agency. The sales slump added to the cash crunch in an industry that is struggling under funding restrictions and a heavy debt load.

Source: Northeast Securities, Tianfeng Securities, company reports SCMP

R&F was a financial white knight as recently as 2017, when it sprang a surprise as the 11th-hour buyer to to take over 77 hotels from Dalian Wanda Group during China’s crackdown on debt-fuelled corporate takeovers. The deal, valued at 19.9 billion yuan (US$3 billion), was the biggest real estate transaction at the time.

R&F would top up its acquisitions six months later, paying £35.6 million (US$49.1 million) to buy 60 per cent of Wanda International Real Estate Investment, which was set up to invest in the Nine Elms project in southwest London.