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Guangzhou R&F to Get $1 Billion Financing From Major Holders

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(Bloomberg) -- Guangzhou R&F Properties Co. will receive HK$8 billion ($1 billion) in short-term financing from top executives, amid growing signs of contagion stemming from the crisis at China Evergrande Group.

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Chairman Li Sze Lim and Chief Executive Officer Zhang Li, who are major shareholders of Guangzhou R&F, will provide the financing over the next one to two months, the company said in a Hong Kong stock exchange filing on Monday.

The announcement came after a tumultuous trading session in Hong Kong, as investors spooked by Evergrande’s deepening cash crunch sold everything from local real estate giants to Chinese banks and insurers. China’s clampdown on leverage in the real estate industry has fueled concerns that weaker developers may struggle to borrow more money needed to fund operations in a slowing market.

Junk-rated Guangzhou R&F said it will receive about HK$2.4 billion of the funds on Tuesday. It expects to have “sufficient liquidity to address obligations that will mature in the short-term” following the support, even without taking into account the availability of measures such as asset sales, it said.

Guangzhou R&F dollar bonds rose on the news, with its 5.75% note due January 2022 jumping 10.2 cents to 86.4 cents in Hong Kong. Its shares earlier closed down 7.3%. The stock has tumbled 60% from its most recent high on May 27.

The Guangdong-based developer has faced increasing funding pressure in recent years. It began disposing of property in August last year to cover its debt, and pledging shares of its units to state-backed companies to boost liquidity.

Moody’s Investors Service cut its credit rating on Guangzhou R&F by one notch to B2 this month, citing increased refinancing risks. It said R&F’s estimated cash flow through 2022 won’t be enough to cover debt repayments, meaning the company will need new financing or asset sales.

Separately, CG Property Services HK, a subsidiary of Country Garden Services Holdings Co., agreed to buy Wealth Best Global from R&F Property for as much as 10 billion yuan ($1.5 billion), another statement showed. Li and Zhang are substantial shareholders of R&F Property, according to a filing.

(Updates to say Li and Zhang are substantial shareholders in R&F Property in the last paragraph. An earlier version was corrected to remove a reference to Guangzhou R&F raising funds from the sale of Wealth Best Global.)

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