China Vanke pledges to repay offshore debts due soon as it seeks calm amid liquidity crisis rumours

The company says it has prepared all the funds needed for the repayment of a US$630 million bond due next Monday, and described the process as ‘orderly’
It comes amid market rumours that Vanke faces a liquidity crisis and is negotiating with state insurers to extend the maturities of some private borrowings

China property

Yulu Ao

Published: 5:30pm, 5 Mar 2024

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China Vanke, the country’s second-largest property developer, has pledged to repay its outstanding offshore debts that are coming due soon, as its shares and bonds tumbled amid rumours about liquidity distress.

The company has prepared all the funds needed for the repayment of a US$630 million bond due next Monday, and is pushing forward with the process of repaying its debts in an “orderly” fashion, it said in a statement to the Post on Tuesday.

The statement came amid market rumours that Vanke is facing a liquidity crisis and has started a new round of negotiations with state insurers to extend the maturities of some private funds it borrowed.

Shares of Vanke fell 2.5 per cent to HK$5.46 at the Tuesday close in Hong Kong, having plunged as much as 4.1 per cent in the morning trading session. The bid price for a bond maturing in June fell 0.60 cents to US$88.82, according to data compiled by Bondsupermarket.

The promise to fulfil its obligations came as New China Asset Management said in a statement at the weekend that it has maintained normal business ties with the developer, in response to unspecified recent reports about the two companies.

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A month ago the indebted developer reached an agreement with Link Reit, a property investment trust, to sell its remaining 50 per cent stake in Qibao Vanke Plaza in Shanghai for 2.38 billion yuan (US$330 million). The shopping mall had been one of the company’s most profitable projects.

The developer, backed by its biggest shareholder Shenzhen Metro Group, said in a meeting attended by financial institutions last November that it had arranged funds for the repayment of debts maturing in 2024, which included “several billion” US dollars available in cash and potential receipt of dividends and exits from offshore projects.

It also said it was pushing ahead with plans to raise funds from mid- and long-term bank loans at that time.

Given its size and scale, any signs of financial strife at Vanke will raise major alarm bells with investors and cast a further pall over China’s crisis-ridden real estate industry. It is one of the few remaining big state-backed developers to enjoy a solid credit rating after peers such as China Evergrande Group and Country Garden Holdings collapsed under mountains of debt.

The Shenzhen-based home builder had about 1.7 trillion yuan of assets and 1.3 trillion yuan of total liabilities as of mid-2023, its interim report showed.

Despite the efforts of the authorities to revive the sector, China’s top 100 developers by sales recorded a 21 per cent drop in new home sales for February to 185.86 billion yuan, a 60 per cent plunge when compared with a year earlier, according to data compiled by the China Real Estate Information Corporation.

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