Finally, amid the bumpy road in China’s property sector, Guangzhou R&F Properties won bondholder approval. The approval is for the exercise of liability management to push back maturity dates around $4.9bn of notes. This transaction could set a new blueprint for the property sector in China. This approval is different from most developers looking for one year bond maturity. R&F won approval for three to four years bond extension maturities for as much as 10 US dollars.
A head of real estate investment banking, Rita Chan argued that this approval signaled the market that there’s a possible sustainable debt structure. In this blueprint, the firm could focus on revenue generation. Furthermore, R&F is also looking for the short-term structure. The firm basically won approval to postpone the repayment for as much as 5.75% noye which was done in July. This kind of exercise is actually controversial, because bondholders believe that R&F is able to buy back $300m for the principal bonds.
However, since market sentiment continues to escalate since the beginning of the year, investors see little opportunity in rebound. Especially, in the case of the property sector in China, there is a slow recovery in the liquidation prospects. On the other hand, the situation is really different compared to last year. Last year, investors were so optimistic about the current situation. However, nowadays, they oversee the condition and become more pragmatic. This is based on the opinion from Melvin Yip, the managing director at Arta Global Markets.
R&F’s approach could actually build more certainty to investors since it is more than one year extension. Logically, the immediate maturity in the extension deal would inflict debate on bond holders since it can cause massive uncertainty and anxiety.