China Vanke seeks to delay another bond payment to avoid default
The company is also facing financial pressure from interest payments on some of its loans and needs to renegotiate those terms
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CHINESE developer China Vanke told some bondholders that it is seeking to extend a yuan bond due this month with an offer to repay 40 per cent of the principal upfront, according to sources familiar with the matter, as it again races to avoid default.
Vanke is considering offering the same terms as earlier proposals to extend three other bonds by a year, the sources added, highlighting how a company at the epicentre of China’s property crisis is still facing liquidity challenges.
The company would need the support of holders of more than 90 per cent of the notes for the plan to take effect, according to the prospectus.
The bond, which has two billion yuan (S$371 million) outstanding, is set to mature on Apr 23. Vanke’s proposal is not final and could change, the sources said, asking not to be identified as the matter is private.
Vanke, which posted a record 88.6 billion yuan loss last year, is one of China’s few major property developers to avoid default so far. But the next few months are critical as it has more than 11 billion yuan of bond maturities looming to July, with five onshore notes and two put options that could be exercised before the end of that month.
The builder will send final proposals on the April bond to holders by Apr 14 and meet with them on Apr 17 to discuss the extension plans, according to a company filing, which did not provide further details. The bond last traded at about 51 yuan in late March, amid thin liquidity, according to data compiled by Bloomberg.
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Delaying payment on the April note would buy Vanke some time as it considers a broader debt plan.
The developer is mulling several options, including potentially asking to extend maturities as long as 10 years, a possible tender offer and setting up an asset-backed trust product, though the eventual details could change.
The company is also facing financial pressure from interest payments on some of its loans and needs to renegotiate those terms.
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Vanke has been in the midst of a liquidity crunch for more than two years, during which it has leaned heavily on loans from its state-owned shareholder, Shenzhen Metro Group, 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.
After posting its second full-year loss since its 1991 initial public offering, Vanke told investors that it is seeking a long-term debt resolution plan and pledged to “actively” find new sources of funding this year.
It also promised to meet its goal for home deliveries, and said it would look to local governments to purchase some land parcels and existing homes. BLOOMBERG
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