China Vanke bonds extend rally on sweetened extension proposals
The company is also preparing a broader restructuring plan, which still needs Beijing’s approval
CHINA Vanke’s bonds extended their rally, a day after the distressed developer unveiled sweetened proposals to extend payments on some notes, potentially easing the risk of an imminent default.
Vanke’s dollar bonds jump 4 US cents on Friday (Jan 16) morning, according to traders, after rising more than 5 US cents yesterday, the largest daily gains in more than 11 months. Both bonds are trading at deeply distressed levels of around 25 US cents.
Several of the company’s yuan-denominated securities were halted in Friday morning trading after prices surged.
The moves came after Vanke released a set of revised proposals to repay 40 per cent of the principal on two bonds due last month that the company is seeking to extend. A separate proposal included a similar offer for another note that has a put option that holders can exercise on Jan 22.
The cash payments would be given priority over any other options included in the extension proposals, which would need to be approved by bondholders to proceed.
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.
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“The new proposals by Vanke far exceeded market expectations,” said Yao Yu, founder of Shenzhen-based credit rating startup RatingDog. “To gain more investor approval, even a 5 to 10 per cent down payment would have been sufficient.” BLOOMBERG
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