Guangzhou R&F sells assets to Country Garden for 10 billion yuan cash, ditching unit’s IPO plan as funding crunch bites

R&F Property Services, a Hong Kong IPO candidate, has agreed to sell its mainland business backing its planned stock sale plan

Controlled by the same shareholders of developer Guangzhou R&F, move shows troubled developers are selling assets to help a sibling company survive

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The Guangzhou Evergrande football stadium under construction on September 17, 2021. Photo: AFP

Published: 12:31am, 21 Sep 2021Updated: 2:19pm, 6 Jan 2022

Guangzhou R&F Properties’ services unit has decided to sell three assets that form the core of a potential Hong Kong stock offer to a competitor for cash, seeking a bailout as the Chinese central bank’s crackdown on debt ceilings since August 2020 is starving companies of much-needed cash.

Country Garden Services Holdings, a unit of one of China’s largest property developers Country Garden Holdings, said it would pay 10 billion yuan (US$1.6 billion) to R&F Properties Services for three companies involved in property management and construction services in mainland China, according to a filing to the Hong Kong stock exchange.

The three companies – Guangzhou Tianli, Tianjin Huaxin and Datong Hengfu – were listed as core assets in the April draft of a stock offering prospectus by R&F Property Services, which proposed to raise between US$500 million and US$700 million in the third quarter in Hong Kong, according to a report by IFR. The listing plan was pending approval by the Hong Kong Exchanges and Clearing Limited (HKEX), the city’s bourse operator. R&F Property Services manages R&F’s real estate projects.

China’s property developers, in the second year of a crackdown on borrowings, are reaching deep into their portfolios to sell whatever assets – buildings, business units or land parcels – at their disposals to find cash to repay their debts and survive in one of the most capital-intensive industries. While all eyes are on China Evergrande Group’s estimated US$300 billion of outstanding liabilities, some analysts said they are glancing at R&F’s balance sheet, where 81 billion yuan of bonds, term loans and debt are due by 2028, according to Bloomberg’s data.

Nanjing Road in Tianjin’s Heping district on June 4, 2007, where Guangzhou R&F Properties was developing schools, a hospital and gardens. Photo: Sandy Li.

The company’s credit rating outlook was cut by Fitch Ratings to “negative” on Monday. R&F’s most active dollar bonds due in November 2022 have declined to about 73 cents on the dollar from above par three month ago, when Evergrande’s latest debt woes intensified.

R&F’s shares jumped for the first day in six on Tuesday after the asset sale to Country Garden was announced, advancing by 12 per cent to HK$4.81, the biggest one-day jump in more than a year. Country Garden rose 8.9 per cent to HK$7.13.