Indebted Chinese Developer R&F Plans $1.4 Billion Share Sale

(Bloomberg) -- Indebted Chinese developer Guangzhou R&F Properties Co. could raise as much as $1.4 billion by selling shares in Hong Kong.

The extra money would strengthen the company’s finances, improve its credit rating outlook and help to lower funding costs, it said on Monday. The timing isn’t set.

Key Insights

  • Investors will be assessing whether the fundraising plans have a whiff of desperation, given the company’s debt load and declines in equity markets that argue against selling shares now.
  • It’s a big deal. Should R&F raise the full amount sought, it will be the largest follow-on Hong Kong share sale by a Chinese developer ever, data compiled by Bloomberg show.
  • Maybe a four-day, 10 percent rebound in its stock before the announcement made an equity fundraising seem more palatable.

Market Reaction

  • R&F’s shares slid as much as 6.5 percent in Hong Kong on Monday, leading declines by developers and extending the firm’s fall this year.

Digging Deeper
  • The company plans to sell as many as 805.6 million H-shares in Hong Kong, which could raise as much as HK$10.7 billion, based on Friday’s closing price.
  • R&F is rated Ba3 at Moody’s, B+ at S&P and BB- at Fitch, according to data compiled by Bloomberg.
  • The company’s net debt to equity, a measure of leverage, climbed to 214 percent at the end of June, the second highest among 21 major developers tracked by Bloomberg Intelligence.
  • Chinese developers face a double whammy of stricter funding constraints and slowing buyer demand. The sector is facing a record bond maturity wall in the first quarter of 2019.

Get More

  • Read more on Chinese developers’ default risks here
  • Read details of R&F’s plan here

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