China Vanke Avoids Immediate Default With More Bond Repayment Deferrals
Bondholders of two yuan bonds voted in favor of a revised extension plan
- China Vanke secured a 2.36 billion yuan (US$339.3 million) loan from Shenzhen Metro Group, its largest shareholder, to repay bond principal and interest.
- Bondholders approved revised repayment extensions for two yuan bonds, delaying the majority of payments originally due in December.
- The developer’s shares rose 2.2% in Hong Kong and 1.9% in Shenzhen following news of the loan and bondholder approvals.
China Vanke 000002 1.47%increase; green up pointing triangle received approval from bondholders to push back repayment on debt and obtained a fresh loan from a state-owned shareholder, giving it more breathing room as the developer wrestles with a prolonged liquidity crunch.
The company said in a statement dated Tuesday that it has received a loan of up to 2.36 billion yuan, equivalent to US$339.3 million, from Shenzhen Metro Group, its largest shareholder with a 27.18% stake. The loan will be used to repay Vanke’s bond principal and interest, the developer said.
“We think Shenzhen Metro and the local government has provided a critical lifeline for Vanke, said Morningstar equity analyst Jeff Zhang.
Meanwhile, bondholders of two yuan bonds voted in favor of a revised extension plan for payments originally due last December, according to a separate filing. Vanke will need to repay 40% of the principal on a 2 billion yuan note and a 3.7 billion yuan bond on Jan. 28, with the rest delayed to the final month of this year.
The Chinese developer came to a similar agreement last week on a separate 1.1 billion yuan bond originally due last month.
The approval of proposed changes to bond repayments as well as a new loan from Shenzhen Metro signals local government support for Vanke in averting immediate default for now, Zhang said.
The embattled home builder has been battered by a prolonged crisis in the Chinese property sector but is viewed as one of China’s more financially resilient developers and one of the few major players yet to default on its debt.
Many of China’s other large developers have defaulted and investors continue to speculate over how policymakers plan to address the yearslong real-estate slump as it drags on.
There may be more liquidity injections by Shenzhen Metro and financial institutions for Vanke, which has more than 7 billion yuan in bonds coming due in the first half of the year, Zhang said.
Vanke’s shares rose 2.2% to 3.69 Hong Kong dollars, equivalent to 47 U.S. cents, early Wednesday in Hong Kong, while its Shenzhen-listed shares advanced 1.9%.