China Vanke Wins Reprieve on Overdue Bond Payments
The developer is one of the few major Chinese players yet to default on its debt
- China Vanke secured 92% bondholder approval to delay payments on a yuan-denominated bond, allowing 40% of the 1.1 billion yuan principal to be paid on January 30, with the remainder deferred for one year.
- Vanke’s shares rose 2.0% to 3.55 Hong Kong dollars, outperforming the Hang Seng Index, despite ongoing concerns about its liquidity and the broader real-estate slump.
- Analysts suggest Vanke’s liquidity will remain subdued due to declining sales and lack of government support, potentially leading to a holistic debt restructuring if its financial health worsens.
China Vanke 000002 2.30%increase; green up pointing triangle, one of the country’s largest real-estate companies, received a small reprieve as its bondholders approved a delay of payments on an overdue bond.
The embattled home builder has been battered by the 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.
Vanke, in a filing to the Hong Kong and Shenzhen stock exchanges Wednesday, said that a bondholders’ vote showed 92% approval for one of Vanke’s proposed extensions for payments on a yuan-denominated bond.
Vanke can now pay back 40% of the principal of a bond worth 1.1 billion yuan, equivalent to $158 million, on Jan. 30 and delay payments on the remainder for a year.
Bondholders had previously rejected proposals to restructure payment on the bond, which was due Dec. 15 last year.
“We think the sweetened offer of paying 40% of principal immediately was favored by most creditors, and Vanke will likely propose similar terms for the 5.7 billion yuan of bonds that are in the grace period,” Morningstar equity analyst Jeff Zhang said.
Many of China’s other large developers have defaulted on their debt and investors continue to speculate over how policymakers plan to address the real-estate slump as it drags on into a sixth year.
Given the heavy weighting on household balance sheets, letting the crisis continue unabated will keep consumer sentiment weak and weigh on consumption.
Vanke’s shares rose 2.0% to 3.55 Hong Kong dollars by midday Wednesday, equivalent to 46 U.S. cents, outperforming the benchmark Hang Seng Index, which slipped 0.15%.
Morningstar’s Zhang added that Vanke’s liquidity is likely to remain subdued due to the slump in its contracted sales and the absence of government support.
There is some uncertainty over whether Vanke can even repay the 40% of the principal due, he said.
“The company may still seek a holistic debt restructuring if its balance sheet quality further deteriorates,” Zhang said.