China Vanke asks to extend bond grace period again, adds collateral
The company is also preparing a broader restructuring plan
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CHINA Vanke presented revised proposals to extend a local bond that included collateral pledges as well as a longer grace period, according to sources familiar with the matter, as the distressed developer struggles to stave off default.
Under the proposed terms, Vanke offered to use receivables from three property firms as collateral for its yuan bond that matured on Dec 15, according to a draft of the proposals sent to holders on Monday (Jan 12) night. Those companies were listed in the draft as Shenzhen Rongxing Real Estate Development, Langfang Wanheng Shengye Real Estate and Beijing Youtai Real Estate Development.
The end of the grace period on the note would also be further extended to Apr 29 from Jan 28. Previously, bondholders rejected plans to delay payments for 12 months, but agreed to lengthen the grace period from the original five working days.
Vanke, the last major Chinese developer to stave off debt failure so far, is under mounting strain from nearly US$50 billion in interest-bearing liabilities. The company is also preparing a broader restructuring plan, which still needs Beijing’s approval, sources familiar with the matter said last week.
Vanke was also due to unveil a revised proposal for another bond that was due Dec 28, but the sources familiar with the matter said they had not yet seen any new plan for that note.
Vanke did not immediately respond to a request for comment.
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Vanke rushed to find cash to meet bond repayments in December after a key state-owned shareholder scaled back support, triggering a cascade of default tests.
The risk is that the developer fails to find a middle ground with bondholders or opts for a sweeping restructuring, both effectively leading to an eventual default and signalling a new front in a property crisis that’s triggered US$130 billion in non-payments and a wave of liquidations.
Separately, debt advisory firm PJT Partners is set to hold a call with Vanke bondholders on Tuesday afternoon, after telling creditors that an event of default was triggered after an original grace period on one of the firm’s onshore notes expired in December. BLOOMBERG
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