[ET Net News Agency, 20 December 2019] S&P Global Ratings said today that a proposed
share placement by Guangzhou R&F Properties Co. Ltd. (02777)(R&F; B+/Stable/--) could
bolster the company's capital structure and enhance its liquidity.
However, the impact on R&F's overall credit profile is moderate, considering the
relatively small size of the placement, said the credit rating agency. Further improvement
will hinge on whether R&F will raise significant additional equity, under approval from
the China Securities Regulatory Commission received earlier this month.
R&F faces over RMB28 billion in effective debt maturities over 2020. This includes
domestic corporate bonds of nearly RMB3 billion due, and exercisable puts of more than
RMB10 billion. The company has no offshore senior notes maturing in 2020.
Although R&F intends to repay offshore debt with the placement proceeds, S&P estimated
the company's debt-to-EBITDA ratio will only improve slightly to 6.2x in 2020, compared
with 6.3x in S&P's previous forecast.
Given the small placement amount, the proceeds would not materially change R&F's debt
leverage but would help enhance its liquidity by adding around RMB3.3 billion to its cash
balance of RMB30 billion as of 30 September 2019.
R&F's contracted sales in 2019 have been weaker than S&P expected, with RMB120 billion
in sales in the first 11 months, compared with our full-year base case of RMB150 billion.
That said, the agency thinks the developer should still reach low single-digit growth from
RMB130 billion sales in 2018. At the same time, its reduced land appetite this year is
likely to lead to a milder debt increase.
On 19 December, R&F proposed the issuance of 273 million new shares on the Hong Kong
stock exchange, equivalent to 7.81% of the enlarged share capital. (KL)