Unit of Chinese developer R&F Properties defaults on US$147 million in interest payments

Chinese developer R&F Properties said a subsidiary missed interest payments on offshore notes in another sign of escalating troubles for the country’s home builders amid a gruelling property downturn.

The Guangzhou-based developer failed to pay interest on three notes issued by its subsidiary Easy Tactic, which was due on July 11, it said in a filing to the Hong Kong stock exchange on Sunday.

The notes, which have accumulated US$147.1 million in interest, were subject to a 30-day grace period that the developer also failed to meet. This non-payment may prompt the note holders to demand accelerated repayment, the developer said.

“The company is in discussions with the holders of the Easy Tactic notes for an amicable solution and will 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 said, adding that it has engaged Alvarez & Marsal as its financial adviser and Sidley Austin as its legal adviser for the process.

R&F shares slid 1.27 per cent to HK$0.78 in morning trading.

Despite measures issued by China’s central and local authorities to support property developers and shore up sentiment, the nation’s slumping property market is seeing little sign of recovery, with home prices declining for a 13th consecutive month in July, while land purchases by China’s biggest developers also dropped 38 per cent compared with the same period last year.

R&F said it sold One Nine Elms, a mixed-use skyscraper in London, three months ago to relieve debt pressure, adding that it will “continue to seek suitable opportunities to dispose of its equity interest in certain project development companies to generate additional cash inflows”.

R&F said its business operations remain normal and that it will “work relentlessly to ensure the delivery of properties, accelerate the sales of properties and stabilise its business operations”.

“Despite the strained market environment, the group remains hopeful that the real estate market in mainland China will gradually recover with the central government’s introduction of policies promoting healthy recovery of the real estate industry,” the company said.