The senior unsecured dollar bonds of R&F Properties were cut to C from CC by Fitch whilst affirming the issuer’s ratings at CC. The downgrade is due to structural subordination of their offshore bonds to onshore debt. As per Fitch, offshore debt recovery fell to 0% by end-2021 from 56% in H1 2021, driven by lower unrestricted cash and weaker gross profit margins. The developer had only RMB 6.3bn ($985mn) in unrestricted cash at end-2021, against capital market maturities of RMB 16.1bn ($2.5bn) in 2022. Contracted sales fell 56% YoY in Q1 2022 and gross profit margins are expected to remain low in 2022. The developer has very limited ability to access capital markets this year and has seen very slow progress in asset disposals.
R&F’s dollar bonds issued by Easy Tactic were flat, trading at 23-24 cents on the dollar.