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China's R&F falls short of payment to creditors after avoiding $725-million default

EconomyJan 11, 2022 06:47AM ET
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© Reuters. FILE PHOTO: A man walks past a wall carrying the logo of Shimao Group, with residential buildings and the financial district of Pudong seen in the background, in Shanghai, China January 1, 2013. REUTERS/Stringer

By Clare Jim

HONG KONG (Reuters) - Debt-laden property developer Guangzhou R&F Properties said it would use $104 million to pay for a tender offer and fees to offshore bondholders deemed to have consented to an extension in maturity of a $725-million bond due on Thursday.

The amount, while far less than the $300 million the firm had expected, will still help it avert default, as Chinese developers battle an unprecedented liquidity squeeze caused by years of regulatory curbs on borrowing that brought several offshore debt defaults and credit downgrades.

In a filing to the stock exchange on Tuesday, R&F said the settlement would leave $608.6 million outstanding on the 5.75% notes, with a six-month extension leading to a new maturity date of July 13.

Last week, the developer said it had insufficient funds for the settlement, as 95.9% of holders of the offshore notes had tendered to sell their notes back to the company, but stopped short of saying how much it had.

Holders who have tendered would be deemed to have approved the maturity extension.

The news came the same day that larger rival Shimao Group Holdings denied a media report that it had struck a preliminary deal to sell a plaza in Shanghai, while saying it was in talks with potential buyers to sell some properties.

The developer, based in the Chinese commercial hub, said last week it had defaulted on a trust loan after missing a payment of 645 million yuan ($101 million).

It is now struggling to raise funds while discussing payment arrangements with creditors.

In a stock exchange filing, Shimao denied the weekend report by financial publication Caixin that said it had a preliminary pact to sell its Shimao International Plaza Shanghai to a state-owned company for more than 10 billion yuan.

However, it added that it "may consider disposing of certain properties if the terms and conditions are appropriate in order to reduce the indebtedness of the group".


Fitch Ratings downgraded Shimao's Issuer Default Rating (IDR) to "B-" from "BB", citing a "lower margin of safety in preserving liquidity" after it defaulted on a trust loan.

The downgrade follows similar action by S&P and Moody's (NYSE:MCO) the previous day, and Shimao's ratings remain on Rating Watch Negative (RWN), Fitch added.

The Caixin report said Shimao had put up for sale all its real estate projects, including residential and commercial properties, and was in talks with China Vanke to dispose of some assets.

Shimao is set to repay a local bond maturing on Saturday after receiving higher-than-anticipated cash inflows from property sales in December, Bloomberg said on Tuesday, citing people familiar with the matter.

Shares of Shimao reversed early losses to close up 0.5%, following a gain of 19% in the previous session, while R&F shares rose 1.2%.

Last week, Reuters reported that a unit of the company, Shanghai Shimao Construction, had proposed extensions on maturities for two ABS due this month totalling 1.17 billion yuan.

In its filing, Shimao said it had no outstanding asset-backed securities (ABS) due and payable as of Tuesday.

China Evergrande Group, set to be China's biggest defaulter, saw its shares ease 0.6%, as it struggles to repay more than $300 billion in liabilities. It has said the voting period for a meeting of onshore bondholders will be extended to Thursday from Monday.

The developer is seeking a six-month delay in the redemption and coupon payments of a 4.5-billion-yuan ($157-million) bond.

($1=6.3715 yuan)

China's R&F falls short of payment to creditors after avoiding $725-million default

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