China steps up Vanke intervention as developer’s woes deepen
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Questions surrounding the whereabouts of its top executive triggered turmoil for China Vanke's bonds and shares last week.
PHOTO: BLOOMBERG
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BEIJING - Chinese officials are taking steps to stabilise operations at China Vanke after deepening liquidity stress and questions surrounding the whereabouts of its top executive triggered turmoil for its bonds and shares last week, according to people familiar with the matter.
Officials at Shenzhen, the southern metropolis where Vanke is based, held a closed-door meeting to discuss Vanke on Jan 17, said the sources. Vanke’s largest shareholder is a state firm controlled by the city, giving the local government tremendous sway over the developer.
The Shenzhen government said during the meeting it plans to ensure that Vanke’s operations remain stable, the people added. The officials also plan to bring in new auditors and financial advisers to assess Vanke’s balance sheet and property projects to pave the way for next steps, according to the people.
The discussions are preliminary and could be subject to change, the sources said.
Financial regulators and the local government of Shenzhen had already played a role in coordinating financing extension for Vanke in the past. A household name in China, Vanke had long been seen as insulated from a protracted property crisis because of its government link.
The company has been in the spotlight since the start of the year. It is facing a wall of debt repayments just as its home sales tank and losses widen amid the unprecedented slowdown in the real estate market.
Investors were thrown into disarray late on Jan 16 over questions on the whereabouts of Vanke’s chief executive officer. Economic Observer, a local media outlet, reported that CEO Zhu Jiusheng had been taken away by the police, and the Shenzhen government sent a working group to intervene in Vanke as the developer may face takeover. A few hours later, another publication said Mr Zhu was reached and the Observer’s stories were removed on Jan 17.
The sources did not have more information on Mr Zhu’s latest status. Vanke and the Shenzhen city government did not immediately respond to requests for comment.
“Vanke’s liquidity could reach breaking point in 2025 in the absence of a state rescue, given its weakest cash coverage of short-term debt since 2004,” Bloomberg analysts Kristy Hung and Monica Si wrote in a note on Jan 20.
The company’s cash coverage of short-term debt stands at 65 per cent and could fall further, they said, adding that the liquidity of its largest backer, state-owned Shenzhen Metro Group, remains similarly tight.
Once deemed too big to fail, Vanke’s debt troubles show how even the highest quality developers have been ensnared by the property crisis, now in its fourth year. The downdraft is taking a toll on the closely watched builder, as the government’s efforts to stem the sector’s decline struggle to materially reinvigorate home-buyer demand.
Vanke has US$4.9 billion (S$6.7 billion) in yuan- and dollar-denominated bonds maturing or facing redemption options in 2025, the highest annual amount of debt repayment ever and the most for any Chinese developer in 2025, Bloomberg data showed.
“Vanke is a household brand in China,” said Mr Raymond Cheng, head of China property research at CGS International Securities Hong Kong. “It may not be that bad if the government could bail out Vanke.”
Another property giant, Country Garden, expects to reach terms with creditors in February regarding the restructuring of US$16.4 billion in offshore debt, and apply for court approval of the terms in April, its lawyer told a Hong Kong court on Jan 20.
The developer was granted an adjournment until May 26 in a hearing held to gauge the extent to which restructuring is proceeding ahead of a decision on a liquidation petition.
Country Garden was once China’s biggest developer by sales. It defaulted on US$11 billion in offshore bonds in late 2023, deepening a debt crisis in a sector that had seen defaults by major peers including China Evergrande Group.
Evergrande was ordered by the Hong Kong High Court to liquidate in January 2024 after the developer was unable to propose a debt restructuring plan acceptable to creditors. BLOOMBERG, REUTERS
