Guangzhou R&F sells assets to Country Garden for 10 billion yuan cash, ditching unit’s IPO plan as funding crunch bites
- R&F Property Services, a Hong Kong IPO candidate, has agreed to sell its mainland business backing its planned stock sale plan
- Controlled by the same shareholders of developer Guangzhou R&F, move shows troubled developers are selling assets to help a sibling company survive
Guangzhou R&F Properties’ services unit has decided to sell three assets that form the core of a potential Hong Kong stock offer to a competitor for cash, seeking a bailout as the Chinese central bank’s crackdown on debt ceilings since August 2020 is starving companies of much-needed cash.
The three companies – Guangzhou Tianli, Tianjin Huaxin and Datong Hengfu – were listed as core assets in the April draft of a stock offering prospectus by R&F Property Services, which proposed to raise between US$500 million and US$700 million in the third quarter in Hong Kong, according to a report by IFR. The listing plan was pending approval by the Hong Kong Exchanges and Clearing Limited (HKEX), the city’s bourse operator. R&F Property Services manages R&F’s real estate projects.
The company’s credit rating outlook was cut by Fitch Ratings to “negative” on Monday. R&F’s most active dollar bonds due in November 2022 have declined to about 73 cents on the dollar from above par three month ago, when Evergrande’s latest debt woes intensified.
R&F’s shares jumped for the first day in six on Tuesday after the asset sale to Country Garden was announced, advancing by 12 per cent to HK$4.81, the biggest one-day jump in more than a year. Country Garden rose 8.9 per cent to HK$7.13.
Like Evergrande, R&F has been trying to offload its residential, hotel and logistics assets to generate cash. The firm held 29 billion yuan of cash, including 16 billion yuan of restricted money on June 30, according to its interim report. Its short-term debt, or borrowing due for repayment within 12 months, stood at 52 billion yuan.
It is unclear how R&F’s asset sales to Country Garden will affect the property services company’s IPO plan. After the deal, all three companies will be consolidated into Country Garden as subsidiaries, according to the statement.
“The acquisition will also enhance the group’s influence and competitiveness in the market, contribute to its long-term steady growth and help the group consolidate its leading position in the industry,” Country Garden said.
Country Garden will pay for its purchases in cash over four instalments, the final price still subject to certain performance guarantees by R&F Property Services. The management services company had 428 million yuan of assets in June, and its net profit tripled last year to 239.8 million yuan from 63.8 million yuan in 2019.