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Chinese developer R&F warns investors over bond repayment offers

Debt-strapped company says may not have cash to make good on partial payback

Chinese developer R&F warns investors over bond repayment offers

Chinese developer Guangzhou R&F Properties said it did not have sufficient funds to buy back a $725 million bond as sales of its assets had not come through as planned.

It said in a filing late on Wednesday that the funds available to settle its tender offer for the offshore bond was materially less than the $300 million it previously expected, due to continued volatility in the property sector.

R&F sought consent from bondholders of the 5.75% notes last month to extend maturity of the bond due Jan. 13 by six months, as part of efforts to “improve its overall financial condition”.

The developer also proposed two options under a tender offer: buying back the notes at a 17% discount, or $830 for every $1,000 in principal; or buying back at most half of bondholders’ notes in full, both with accrued interest.

China’s real estate developers have been struggling to overcome tight liquidity conditions in the past few months due to the government’s clampdown on excessive borrowing and speculation in the sector.

R&F said in the filing that 71.7% of the bondholders had tendered for the first option, while 24.2% for the second – but it expects it has “materially less” than $300 million to buy back all the bond.

“Proceeds from certain asset sales contemplated by the group may fail to materialise by the settlement date,” it said, adding the settlement date has been postponed by two days to around Jan. 12.

In the document last month, the firm said it would accept tenders of notes on a pro rata basis, and any notes not accepted for purchase would be returned to the bondholders. And holders who have tendered would be deemed to have approved the maturity extension.

“Despite the delays in the progress of certain anticipated asset sales, the group is continuing to take active measures to shore up its liquidity position up to the settlement date,” R&F added in the Wednesday filing.

The developer’s total borrowings at the end of June were 143.4 billion yuan ($22.50 billion), according to its half year financial report.

The bond in question dropped to 61.5 cent on the dollar in Asia afternoon hours on Thursday, from 66.5 overnight, while a R&F yuan bond due April 2022 plunged 10%.

Shares of R&F listed in Hong Kong were up 1% at 0600 GMT, versus a 0.4% drop in the broader market.

($1 = 6.3736 Chinese yuan)

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