China Vanke jolts bond holders again with plan for one-year delay
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Vanke, once the nation’s largest builder by sales, told bond holders on Dec 1 that it was seeking a one-year delay to pay the two billion yuan (S$367 million) note originally due Dec 15, sources said.
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BEIJING - China Vanke, the embattled developer that rattled markets last week with an unexpected request to delay a local bond payment, has again shocked creditors with details of the plan.
Vanke, once the nation’s largest builder by sales, told bond holders on Dec 1 that it was seeking a one-year delay to pay the two billion yuan (S$367 million) note originally due Dec 15, people familiar with the matter said. The 3 per cent interest would also only be paid after a year. The proposed changes would require at least 90 per cent approval from holders, based on the note’s prospectus.
Several creditors had hoped for some upfront payments and for interest to be paid, they said, asking not to be identified discussing private matters. Many Chinese developers, including giants such as Country Garden Holdings, had previously offered instalment payments amid delayed payments, though even with extensions some have struggled to meet the new terms.
“The proposal is worse than our expectation with no upfront cash payment,” said Ms Zerlina Zeng, head of Asia strategy at CreditSights Singapore.
She expects Vanke to extend onshore bonds maturing in 2026, which could pave the way for a comprehensive debt restructuring covering both onshore and offshore debt.
The price of the bond for which Vanke is seeking an extension has plunged to about 27 yuan from near par before the extension plan was announced last week. The builder’s US dollar notes due in 2027 slid two US cents on Dec 2 to the deeply distressed level of 20 US cents.
State-backed Vanke will hold a meeting with the yuan note holders on Dec 10 to review the extension proposal, according to a filing last week when it announced its request to delay the payment – the first of a 13.4 billion yuan wall of maturities stretching through mid-2026.
The move sent some of Vanke’s notes plunging to record lows, and led to declines in property shares amid broader concerns about Beijing’s commitment to support even its largest distressed developers.
China’s multi-year property crisis has led to record defaults and liquidations or restructurings at real estate firms, including the nation’s biggest, such as Country Garden and China Evergrande Group. Vanke, one of the last major developers to have avoided defaulting and long regarded as a key gauge of government support for China’s property sector, has been grappling with severe liquidity pressures since late 2024.
S&P Global Ratings warned on Nov 28 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 was also rejected by at least two big local banks as it tried to secure a short-term loan to quell its liquidity challenges, Bloomberg News reported last week.
China’s property malaise continues to bring more losses for investors in the sector. Recovery rates for creditors in China’s distressed developer cases are starting to come more into view and the picture is grim.
While each case is different and Vanke has yet to enter any restructuring, creditors are surely gameplanning potential scenarios. Those would reference peers like Country Garden and Evergrande, where some estimates put likely eventual recoveries in the range of 10 per cent to 24 per cent and just cents on the dollar, respectively. BLOOMBERG
