A co-founder of Chinese property developer Guangzhou R&F Properties Co Ltd, Zhang Li, is wanted in the US over allegations he provided kickbacks to secure contracts in California.

Shares and bonds of the distressed builder dropped on Tuesday morning (Dec 13), following the news that Zhang was arrested on Nov 30 by London police, and is facing extradition proceedings. He is contesting his transfer to the US.

Judge John Zani granted bail of £15 million (US$18.4 million or RM81.78 million) on Monday at the Westminster Magistrates’ Court, the joint highest sum ever recorded for UK courts. He’ll be confined 24 hours a day in an apartment on the 43rd floor of a London tower, monitored by security and CCTV.

The 69-year old Zhang is alleged to have “provided kickbacks and funds to co-conspirators in order to obtain the appropriate permits for a construction project”, according to a court listing. 

Shares in R&F tumbled as much as 16% in Hong Kong and traded 11% lower at 10.14am. The developer’s dollar bonds also slid, with a note maturing in 2027 down 1.9 cents, set for the largest daily losses since August. 

Its bonds may see volatility following Zhang’s arrest, Bloomberg Intelligence credit analyst Daniel Fan wrote in a note. 

R&F is among developers that are struggling with a liquidity crunch and housing market slowdown in China. In the US, the firm did business through a domestic affiliate. Among other projects, the company was responsible for a large, multimillion-dollar mixed-use residential and commercial development project in San Francisco, according to the listing.

R&F said it didn’t provide any security money for Zhang’s bail, according to a filing with HKEX. The case won’t have any material adverse impact on its business and operations, it said. 

R&F said earlier on its official WeChat account that it plans to fight what it called “false allegations” that Zhang was charged with bribery “for hosting a dinner in China for a former public affairs executive in San Francisco, and providing him with hotel accommodation”.

Zhang’s lawyer declined to comment outside the court. 

Zhang, a former government official who rose to lead one of China’s largest real estate firms, will be housed in a five-bedroom apartment, complete with former military operatives on guard in 12-hour shifts. The security operation will cost some £200,000 a month, the court was told. Zhang will be denied any device that connects to the internet.

The aim is to try to replicate as closely as possible the standards of a prisoner on remand, the security operations manager told the court.

Zhang founded R&F with Hong Kong native and former trader Li Sze Lim. They made their name by purchasing a large land parcel in suburban Guangzhou and later selling it for a big profit.

  - Bloomberg