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guandian.com on september 3, r&f properties released insider information on the hong kong stock exchange, disclosing the appointment of receivers for the assets of several subsidiaries of r&f properties.

the announcement disclosed that on july 3, zhao xi, r&f hong kong and yu yi each received a notice from serica agency limited as the security agent, which included the appointment of chan leung lee and yuen tsz chun of frank forensic and corporate recovery limited as joint and individual receivers of the assets secured by the security agent in relation to the financing agreement.

the disclosure of the appointment of a receiver for the assets of the subsidiary basically means that r&f has lost the possibility of keeping its hotel assets. currently, r&f properties is evaluating the legal, financial and operational impact of the appointment of a receiver.

sudden liquidation

on july 9, r&f properties announced on the hong kong stock exchange that its wholly-owned subsidiary, zhaoxi co., ltd., had received a liquidation petition from seatown private credit master fund on july 8. the petition has been submitted to the hong kong high court.

as one of the first real estate developers in china to complete the extension of its overseas debts, it is unbelievable that r&f properties did not face liquidation when its debts were high. instead, it was petitioned for liquidation by its creditors after completing its debt restructuring.

the creditor that filed for liquidation is seatown private credit master fund, one of the lenders in the financing agreement signed by r&f group in early 2023.

in this financing, r&f's wholly-owned subsidiary zhaoxi is the lender in the financing agreement, and r&f hong kong is one of the guarantors. the collateral is all the equity of r&f properties' subsidiary held by zhaoxi, which owns 68 hotels and an office building in the country.

the reason for the liquidation is that r&f's wholly-owned subsidiary zhaoxi has a principal and accrued interest of us$613.7 million that has not been repaid, with a total value of approximately rmb 4.5 billion. seatown private credit master fund holds 18% of the outstanding principal amount, worth us$110 million.

the creditors discovered that r&f had no money to repay its debts and did not know when it could repay the debts, so they filed for liquidation in court.

it is worth noting that seatown private credit master fund is a private credit sovereign fund affiliated to singapore’s government investment company temasek.

at that time, r&f continued: "the loan is adequately secured by collateral, including the entire equity interest in a wholly owned subsidiary of the company, which indirectly holds 68 hotels and an office building in the people's republic of china. secured creditors can exercise their rights to enforce the collateral rather than apply for liquidation of the subsidiary. any such attempt to apply for liquidation would undermine value and reduce the recoverable recovery of creditors."

this announcement that r&f has appointed a receiver for the assets of its subsidiaries basically means that r&f has lost the possibility of keeping its hotel assets.

former wanda assets

it is worth noting that in the announcement at that time, r&f properties stated that "the loan already has sufficient collateral", namely 68 hotels and an office building in china. the largest commercial asset package in r&f's hands is the hotel assets acquired from wanda that year.

on july 20, 2017, r&f announced on the hong kong stock exchange that it had entered into an agreement with dalian wanda, according to which r&f properties agreed to acquire the interests in 76 city hotels sold by dalian wanda for approximately rmb 19.906 billion and 70% of the interests in yantai wanda (yantai wanda wenhua hotel).

at that time, both parties were satisfied with the deal. at the performance conference in early 2018, li silian, co-chairman of r&f properties, repeatedly stated that the deal was worthwhile, cost-effective, and reasonable. at that time, the hotel business revenue target for 2018 was planned to increase significantly to 7 billion yuan.

however, what followed was four consecutive years of losses. from 2018 to 2021, r&f properties' hotel operations achieved operating income of 7.028 billion yuan, 7.022 billion yuan, 4.463 billion yuan, and 5.07 billion yuan, respectively, with profits of -459 million yuan, -1.008 billion yuan, -1.427 billion yuan, and -1.422 billion yuan.

so starting from 2022, r&f began to deal with this batch of hotel assets, and sold the tianyuan international westin in fuzhou for 430 million yuan that year.

subsequently, r&f successively sold some of the 77 hotels from wanda, including the beijing r&f wanda realm hotel. the 68 hotels mortgaged this time are the last territory of r&f in the hotel industry.

perhaps it was the assets acquired from wanda that gave r&f a breathing space at this tense moment.

in may this year, r&f properties sold the one nine elms project in london, uk. interestingly, the london project was acquired by r&f from wanda that year.

according to information, the project is the "dun one" project acquired by r&f from wanda in 2018, also known as "one nine elms" in london, with a construction area of ​​105,000 square meters. it provides a total of 437 private residential units. city tower provides 57 economical residences and river tower has a hotel.

the transaction was caused by the fact that r&f borrowed an 800 million pound construction loan to promote the progress of the project. after the project was completed at the beginning of this year, r&f found that the current corporate situation was unable to repay the loan within the repayment period and would face the risk of default.

to avoid default, r&f decided to sell one nine elms to existing us dollar senior note holders for £1.6 billion.

the transaction will be settled preferentially through the amortization of the corresponding outstanding existing u.s. dollar senior notes at par, discounted to par pursuant to a reverse dutch auction.

under the agreement, the shares of r&f international properties to be sold will be paid for hk$1 in cash, while the price of the loans to be sold will be all the existing notes that the buyer will receive under the exchange offer, with a minimum principal amount of us$800 million.

r&f's action this time was decisive. it not only avoided a series of adverse effects brought about by default, but also finally got rid of a huge amount of us dollar bonds worth up to us$1.17 billion and made a profit of 2.1 billion yuan.

in its 2024 interim results announcement, r&f properties mentioned that over the past year, r&f properties mainly dealt with debt maturity issues by selling assets and realizing assets in exchange for cash or reducing debt.

so how far can r&f go in selling assets?