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Chinese developer Guangzhou R&F Properties Co. Ltd. sells its property management unit to a bigger rival and raises funds from its two major shareholders in an attempt to find liquidity from alternative sources to repay its debt.
CG Property Services HK – a unit of Country Garden Holdings Co. Ltd., China’s largest real estate developer in terms of total sales – to acquire Wealth Best Global from R&F Property Services for up to 10 billion yuan (1 , $ 5 billion), according to a deposit on the Hong Kong Stock Exchange after the market closed on Monday. R&F Property Services, which filed for an IPO in Hong Kong in April for a third quarter listing, manages R&F’s various real estate projects.
In a separate declaration Listed on the stock exchange the same day, R&F said it will receive 8 billion Hong Kong dollars ($ 1 billion) in funding from its two largest shareholders, co-chairmen Li Sze Lim and Zhang Li, over the course of one to one. next two months.
Along with the funds, the company said it “expects to have sufficient liquidity to meet the obligations that will fall due in the short term.” R&F shares fell 7.3% to close at HK $ 4.29 on Monday before climbing more than 14% to HK $ 4.9 on Tuesday morning.
Both announcements followed a wild sale day on monday triggered by a number of risks, including the impending maturities of the offshore bonds of the China Evergrande group and the financial consequences of its potential collapse.
The Hang Seng real estate index fell 6.7% on Monday for its biggest drop since May 2020, according to data from Bloomberg, led by developers including Henderson Land Development Co. Ltd., which plunged 13%, and Sun Hung Kai Properties Ltd., which sank ten percent. Ping An Insurance Group Co. of China Ltd. fell 5.8% on concerns over its exposure to Evergrande debt, to which the insurance giant said on Friday it had “no exposure”.
Payments due Thursday by Evergrande include $ 83.5 million in interest on an 8.25% five-year dollar bond, according to Bloomberg. The world’s most indebted developer has to pay a 232 million yuan coupon on an onshore bond the same day.
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Cover Article: How Evergrande Could Become the “Chinese Lehman Brothers”
In a report As of Monday, S&P Global Ratings said it did not expect the Chinese government to provide direct support to Evergrande, and believed authorities would only be “forced to intervene if there was a large-scale contagion causing the failure of several large developers and causing systemic problems. risks to the economy.
“The failure of Evergrande alone would lead to little chance in such a scenario,” said the global rating agency. Evergrande shares in Hong Kong closed 10.2% lower at HK $ 2.28 on Monday.
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R&F Properties, established in 1994 and listed in Hong Kong in 2005, is ranked 30th among the country’s largest real estate companies based on total sales from January to August, according to the China Index Academy.
For the six months ended June 30, the company’s interest-bearing debts reached 143 million yuan, of which the short-term debts amounted to 51.9 billion yuan, according to its interim report released at the end of last month.
First-half revenue increased 18% to 39.5 billion yuan, while net profit fell 18.8% to 3.18 billion yuan. The company had a cash balance of 28 billion yuan.
For the second half of the year, R&F said it will continue to focus on managing its cash flow to improve its overall credit profile through contract sales and asset sales. Before selling her property management unit, she had sold equity and assets, as well as carried out large-scale layoffs.
The company issued a three-year, $ 200 million bond at an interest rate of 8.875% in September 2018 through its offshore financing and investment platform, Easy Tactic Ltd. The bond should mature within a week.
Earlier this month, Moody’s Investors Service downgraded the R&F rating one notch to B2, citing the company’s increased refinancing risks attributed to “weakened access to offshore financing and a significant amount of maturing debt. “.
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor-in-chief Michael Bellart (michaelbellart@caixin.com)
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