Distressed Chinese developer Guangzhou R&F Properties plans to sell a property project in London by asking to receive some of its dollar bonds and just HK$1 (S$0.17) of cash. 

The defaulted builder signed a letter of intent to sell the holding company of Market Towers at 1 Nine Elms Lane, according to a filing late Tuesday (Feb 6) in Hong Kong. The mixed-used development is valued at £1.34 billion (S$2.27 billion) and includes 437 residential units and a hotel, it said. 

The buyer, a special purpose vehicle owned by Chinese real estate tycoon Cheung Chung Kiu, chairman of Hong Kong builder C C Land Holdings, plans to launch an exchange offer to get the dollar debt requested. R&F is asking for a nominal fee of HK$1 in cash, plus all the notes the buyer receives under the exchange offer, with a minimal principal amount of US$800 million, the filing showed. It would then cancel the notes. 

R&F is among dozens of Chinese developers to have defaulted on their debts after a government crackdown on excess leverage led to a housing market rout. The prolonged crisis threatens to roil already-fragile global real estate markets as cash-starved developers look to sell overseas assets to pay off debts and complete projects at home. 

Bondholders of three dollar notes of R&F are set to be invited to swap them for new bonds sold by Cheung’s company, which are expected to be issued in combined principal amounts of up to US$2 billion. 

The buyer will also arrange funds to pay off a loan owed by R&F, part of the conditions for the deal to be completed, according to the filing. Some of those funds are set to be raised from the bond swap, as R&F noteholders could pay cash to subscribe to a tranche of bonds sold by the buyer.

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R&F, facing creditors entanglements in China since its delinquency, has US$8.6 billion dollar bonds outstanding, according to data compiled by Bloomberg. The three notes involved in the deal have a combined US$5.7 billion outstanding principal amount. 

R&F’s co-founder Zhang Li resigned as chief executive officer in December after admitting to bribing a top San Francisco building official. In 2022, Zhang was arrested at London’s Heathrow Airport on allegations that he provided kickbacks to San Francisco officials to win permits for construction. BLOOMBERG