China Vanke wins creditor support for bond repayment plan; imminent default risk recedes
[HONG KONG] China Vanke said on Wednesday it had gained creditor approval to defer some repayments soon owed on a 1.1 billion yuan (S$205 million) puttable bond, likely helping the state-backed property developer stave off an imminent default.
The embattled firm is also negotiating with creditors about payments for two other yuan bonds that matured last month, and this deal - the biggest concession so far from bondholders - bodes well for those discussions.
Vanke, one of China’s best known real estate developers with some US$50 billion in debt, has taken centre stage in the country’s five-year-long property sector crisis that has seen many of its peers, both big and small, default on payments.
A default from Vanke, which has many projects in top-tier cities, could knock homebuyer confidence in those locations, dealing a likely blow to the world’s second-largest economy which is grappling with sluggish growth and weak consumer confidence.
Vanke surprised the market last week with sweetened proposals to defer repayments for the three yuan bonds by offering to pay 40 per cent of principal as well as additional collateral, after bondholders resoundingly rejected earlier plans.
The 1.1 billion yuan bond with January 2028 maturity date has a put option that allows creditors to demand repayment of the principal on Thursday, Jan 22. Under the deal, 90 per cent of creditors agreed to defer payment of the remaining 60 per cent of the principal by a year.
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But some other resolutions were rejected, including one where Vanke would immediately pay 5 per cent of the principal and have a grace period of 60 days for repayment of the rest.
Creditor voting on two other onshore bonds worth a combined 5.7 billion yuan started on Wednesday and will conclude on Monday.
Vanke is also seeking for the repayment of 60 per cent of the principal to be deferred by one year. Grace periods for the bond payments end on Jan 28 and Feb 10 respectively.
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“Approval of the 40 per cent upfront payment plan for the two notes that were due in December last year now looks assured, allowing Vanke to avoid a substantive default in the first quarter,” said Yao Yu, founder of credit research firm RatingDog.
“From the second quarter, a run of large bond maturities will put the property developer to the test,” Yao added. REUTERS
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