NEWS WRAP: R&F Properties distress grows with new bond defaults

The developer failed to distribute $147 million in interest payments to bondholders within a 30-day grace period of the due date

by Teri Yu

Guangzhou R&F Properties Co. Ltd. (2777.HK) disclosed that it missed interest payments on three of its dollar-denominated offshore bonds worth $4.53 billion, as the former real estate powerhouse struggles under the weight of huge debt and stagnating property sales.

The missed interest payments, totaling $147.1 million for bonds issued by its Easy Tactic subsidiary, were due on July 11th, R&F disclosed in a stock exchange announcement on Sunday. R&F remained unable to fulfil its obligations to bondholders even after a 30-day grace period, effectively putting it in default.

The failure to service its bond debt is just the latest sign of distress coming from R&F. Early last month, the company received a winding-up petition from a Singapore-based private equity fund after the company failed to make a loan repayment.

R&F acknowledged the gravity of the situation, stating that it was “in discussion with” the note holders to find a solution and would “continue to closely monitor the situation and consider all possible actions including but not limited to the formulation of a holistic liability management solution in respect of the group’s offshore debts.”

R&F has enlisted outside consultants Alvarez & Marsal and Sidley Austin to navigate the restructuring process and engage with its bondholders.

In a bid to alleviate its financial pressure, R&F sold a mixed-use skyscraper in London in May and vowed to sell additional equity interests in other projects to raise much-needed cash. But it acknowledged that the China property market is currently in a major slump, leading to “unprecedented difficulties” with liquidity and financing.

R&F’s woes mirror broader challenges facing China’s property sector. Home prices have fallen for 13 consecutive months, while land purchases by the largest developers have plummeted by 38% year-over-year. Other developers facing similar challenges include industry giants Shimao and Country Garden, which have also been hit with winding-up petitions and defaults.

Despite the grim outlook, R&F reported earlier that its total contracted sales for June amounted to 1.15 billion yuan ($160 million), with 80,500 square meters of gross floor area sold. It said it remains hopeful that China’s real estate market will eventually recover, bolstered by the central government’s policies aimed at promoting a healthy industry rebound.

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