**: Viewpoint.com.
Zhang Songqiao once again solved the urgent need of R&F Real Estate.
The Chongqing businessman has recently acquired One Nine Elms, Europe's tallest residential project in London, but at the cost of helping R&F pay off its debts.
The delay in the construction period is to blame
R&F Properties is the first domestic real estate company to complete the extension and restructuring of its overseas debts.
In July 2022, the company successfully facilitated the overall rollover of US dollar bonds, and successfully merged and replaced 10 notes originally due in 2022, 2023 and 2024 into three bonds.
That is, issued by R&F subsidiary Yiluo***, which expires in 20255% cash 75% in-kind payment of senior notes;6. 2027 due year5% cash 75% in-kind payment of senior notes;6. 2028 due year5% cash 75% Paid-in-Kind Senior Notes, (Annual Notes).
According to the plan, the coupon of the three notes will be paid in two ways, and R&F can pay 6. per annumThe 5% coupon is paid in cash, or 75% of the "in-kind payment" is made in the form of new R&F notes. Both options are paid semi-annually.
According to the data, in the interest payment in kind (PIK interest), the interest payment is not a cash payment, but is realized by increasing the principal amount of interest.
As a credit enhancement jump, the three notes are secured by cash flows generated from two overseas assets**, R&F One Nine Elms (formerly known as London One) and R&F Princess Cove in Malaysia.
Clauses were also put in place to accelerate amortisation after two years, as well as the use of cash flows from designated assets in London and Malaysia for mandatory repurchase redemptions after repayment of the project's senior mortgage debt.
Therefore, in the past year and a half, R&F Properties, which has been walking on thin ice, has chosen to repay the interest on the three notes in the form of in-kind payment, while trying its best to promote the construction progress of the two projects. The latest repayment action occurred on 11 January 2024, increasing the outstanding principal amount of the three US dollar notes by approximately 20.6 billion US dollars.
Among them, the latest principal amount of the 2025 notes has been increased to 14$4.3 billion, the latest principal amount of the 2027 notes has increased to 24$6.1 billion, the latest principal amount of the 2028 notes has increased to 17$9.3 billion, a total of about $5.6$9.7 billion, compared with $49.7 billion at the beginning of the rollover$4.3 billion, an increase of about 7$5.4 billion.
While promoting the construction progress of the two projects, R&F Properties is also actively looking for buyers to take over. Unfortunately, the progress of the Nine Elms project has lagged behind.
According to the information, the project, originally named London One, was acquired by R&F Properties from Wanda in 2018, with its specific address at Market Towers, 1 Nine Elms Lane, London SW8 5NQ, and registered title number SGL504521 in the English Land Registry.
The project is a major part of the redevelopment of London's Nine Elmes area, with two towers, the 42-storey River Tower and the 57-storey City Tower, housing 437 private residential units, 57 affordable residences, a five-star hotel, and more than 3,500 square feet of retail and public space.
The ONE project in London has become a key project for R&F Properties in the UK, and it is also a key factor for R&F to win the extension in 2022.
The main contractor for the construction was Multiplex, a global construction company specializing in the renovation of large high-rise buildings, and the construction contract was signed in August 2017. The project was initially expected to be completed in 2022, but was delayed due to arrears. There are reports that Multiplex chose to shut down after not being paid.
In mid-2022, R&F Properties secured 7£7.2 billion in financing.
It is speculated that the loan, which is an important component of the senior mortgage debt mentioned above, sets out a number of sales milestones for the Nine Elms Project and is placed as a default clause in the loan agreement. It is worth noting that the project is planned to be an existing home sales project.
In mid-2023, R&F Properties mentioned that the Nine Elms project is expected to be completed by the end of that year, but the actual progress may be slower than expected.
According to the official website of the main contractor, Multiplex, the first phase of the One Nine Elms project was completed by the end of November 2023. On January 29, 2024, it was reported that Multiplex is pouring concrete for the follow-up works of the One Nine Elms project.
R&F Properties' latest **, One Nine Elms project will not be completed until April this year at the earliest, but "certain sales milestones set out in the agreement relating to the loan (senior mortgage debt of the project) are becoming increasingly difficult to achieve, and failure to achieve them could lead to default and potentially reduce the value of the project**." In other words, it will ultimately affect the outcome of the previous debt restructuring.
Nine Elms Emergency**
R&F Properties chose to urgently ** the Nine Elms project in London, and this time it still found a trustworthy transaction party - Zhang Songqiao.
On the evening of February 6, it was reported that R&F Properties (Hong Kong)**, as the seller, entered into a letter of intent with London One Limited, which is wholly owned by the buyer Zhang Songqiao.
Accordingly, Zhang Songqiao will acquire from R&F the entire equity interest in R&F International Property Investment***, a London-based One Nine Elms project company, and its subsidiaries, and will repay a huge loan owed by R&F International Properties to R&F Properties (Hong Kong) (which is expected to reach approximately 95. as of March 31, 2024).HK$0.1 billion), and funds will be arranged to repay the senior mortgage debt of the Nine Elms Project.
In terms of consideration, the total consideration for all equity interests of R&F International Properties and its subsidiaries is HK$1 in cash; For the repayment of the outstanding loans, London One Limited will need to take over part of the principal amount of R&F Properties' three rollover US dollar notes to correspond to the mandatory repurchase redemption and other terms originally agreed.
According to the announcement, London One Limited is required to take over a minimum principal amount of US$800 million (equivalent to approximately 62.2 billion).HK$4.7 billion), which just covers the increase in the principal amount of R&F's previous interest payments in kind.
The way to take over was for Zhang Songqiao, the sole shareholder of London One Limited, to participate in the exchange offer and enter into a subscription agreement.
R&F will invite eligible holders of the three rollover notes to surrender their existing notes in exchange for the expected issuance of US$400 million aggregate principal amount of B1 Perpetual Bonds and US$400 million aggregate principal amount of B2 Perpetual Bonds by London One Limited, together with cash consideration to subscribe for Tranche A Perpetual Notes in an expected aggregate principal amount of up to 8£200 million.
Zhang Songqiao is currently committed to participate in the Exchange Offers for Batch A and B and to underwrite any shortfall amounts in the Exchange Offers for Batch A and B in the event of a shortfall in the Exchange Offer.
At the same time, R&F will separately invite eligible noteholders to surrender the existing notes in exchange for Tranche C perpetual bonds issued by London One Limited, which are expected to issue aggregate principal amount of up to US$200 million.
Subsequently, the deal will need to be agreed upon by multiple stakeholders and finally completed. The deadline for the transaction to land is set for May 31, 2024.
If the deal is finalized, the final consideration for Zhang's acquisition of the Nine Elms project in London could be well above US$800 million. On the one hand, R&F Properties was able to deliver on the promise in the extension clause, reducing the overall debt scale and interest burden, and at the same time being able to get out of this overseas project.
Prior to this, Zhang Songqiao had taken over R&F's other London project, "Thames City", in April 2022.