China Vanke seeks bond delay again as it works on restructuring plan

[SHANGHAI] Distressed developer China Vanke has begun reaching out to bondholders about delaying payment on a note due next month, while telling them that it is also weighing a broader restructuring, sources familiar with the matter said.

Company representatives held meetings last week with selected holders of its yuan bond that matures on Apr 23, according to the sources, who asked not to be identified as the matter is private. During those talks, Vanke told creditors that it was considering a larger plan that would include longer-term extensions of debt, the sources said, in what could be one of China’s biggest-ever restructuring.

While Vanke has been working on a debt plan at the request of authorities for months, this was the first time it had disclosed these moves to those selected bondholders.

Vanke is one of the few major Chinese property developers to so far avoid default, even as its liquidity has been strained by the country’s years-long real estate crisis. The company faces more than 11 billion yuan (S$2 billion) of bond maturities in the coming months, with five onshore notes and two put options that could be exercised before the end of July.

Delaying payment on the Apr 23 bond would allow Vanke to again avoid that fate while awaiting guidance from regulators on the broader restructuring. To secure the extension, Vanke must win the backing of holders of more than 90 per cent of the notes, according to the prospectus.

Earlier this year, Vanke got bondholder approval to extend three of its other yuan bonds after offering to repay 40 per cent of the principal on the notes. That deal is likely to loom over the talks to extend the April bond. A holder with enough notes to block any deal has already signalled it may not support an extension if terms are worse than those of the previous plan, two of the sources said.

Vanke is also facing financial pressure from interest payments on some of its loans and needs to renegotiate those terms, the sources added. The developer has asked some commercial banks to accept delayed interest payments on certain borrowings, sources familiar with the matter said in December.

Vanke is considering several options in the broader restructuring, including potentially asking to extend maturities as long as 10 years, a possible tender offer and setting up an asset-backed trust product, one of the sources said. The eventual details could change.

Vanke did not reveal a timeline for the debt restructuring during at least one of the face-to-face meetings, the source said. Company representatives said that it intends to sound out creditors on a potential restructuring proposal, before taking the feedback to its state-owned shareholder Shenzhen Metro Group, the source said.

SEE ALSO

China Vanke’s record loss leaves developer at mercy of state backer

China Vanke warns losses widened to record last year

Vanke gets approval for more bond repayment deferrals as China is seen stepping in to avert immediate default

China Vanke wins creditor support for bond repayment plan; imminent default risk recedes

China Vanke bonds extend rally on sweetened extension proposals

More

Vanke did not immediately respond to a request for comment.

The distressed developer has been wrestling with a liquidity crunch for more than two years, during which it leaned heavily on shareholder loans from Shenzhen Metro to service debt. It remains unclear whether there would be any further support from Shenzhen Metro to help address the builder’s upcoming bond maturities in the months ahead.

Vanke’s 21 per cent stake in Singapore-based GLP, which is facing mounting investor concerns, is also adding to the strain. GLP is said to be aiming for an initial public offering in Hong Kong as soon as the first half of this year. If successful, that could eventually help Vanke shore up its liquidity. But if market jitters dampen interest in the offering, Vanke could lose a crucial tool to bolster its finances.