Several Vanke bondholders signal they will oppose extension plan: sources
The extension will give Vanke some breathing room before it considers a broader restructuring
[HONG KONG] At least three investors in a China Vanke bond maturing this month have signalled to the embattled developer that they will oppose a plan to delay repayment, people familiar with the matter said.
Representatives of state-backed Vanke, which has jolted markets with its proposal for a one-year payment extension on the note, contacted some of the holders individually over the phone on Tuesday (Dec 2) and asked whether they will sign off on the plan, the people said, asking not to be identified as the matter is private.
The extension is meant to give Vanke some breathing room before it considers a broader restructuring, one of the people said, citing the company.
Company representatives told some bondholders that there is not much room to improve the terms of the proposal as the Shenzhen-based builder needs to conserve cash to complete unfinished homes and deliver them to buyers, two of the people said. They also told some bondholders that most of the notes are held by Chinese banks, one of the people said.
Once China’s largest builder by sales, Vanke has faced growing financial challenges in recent months. Its decision to seek an extension on the yuan bond was the latest blow to a sector still reeling from a yearslong property crisis.
The builder, which is one of the few big Chinese developers to avoid default, has 13.4 billion yuan (S$2.5 billion) of bonds coming due or facing redemption pressure through mid-2026, adding to its liquidity concerns.
Vanke did not immediately offer a comment Wednesday.
Most of Vanke’s yuan bonds have plunged to record lows this week, trading at about 25 per cent of their face value as of Wednesday morning. Its US dollar notes due in 2027 are hovering at around 21 cents, according to data compiled by Bloomberg. Its shares have tumbled more than 45 per cent in Hong Kong since their February high and hit a fresh low on Monday. Short bets on the company, meanwhile, have climbed to a decade high.
Vanke told bondholders on Monday that it was seeking a one-year delay to pay the two billion yuan note, which was originally due Dec 15. The 3 per cent interest would also only be paid after a year. Several creditors had hoped for some upfront payments and for interest to be paid.
The company will hold a meeting with bondholders on Dec 10 to review the extension proposal. Failure to pass the plan before the bond’s original maturity date could increase the risk of default. The proposed changes would require at least 90 per cent approval from holders, based on the note’s prospectus.
Vanke also has more 30 billion yuan in shareholder loans from its largest state-owned backer, Shenzhen Metro Group, which has helped it avoid defaults this year. But that backing came under scrutiny after Shenzhen Metro signalled it plans to tighten borrowing terms.
S&P Global Ratings warned on Friday that Vanke’s financial commitments are “unsustainable” given its weak liquidity and the risk of a distressed restructuring within the next six months has increased.
Vanke earlier held talks with banks to try to secure a short-term loan to help repay its yuan bonds due in December, including the one under the extension plan, but was rejected by at least two big local lenders. BLOOMBERG
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