New | S&P cuts Vanke’s credit outlook to ‘negative’ as boardroom tussle escalates
Tension among key shareholders may weaken the company’s business execution and financial discipline, S&P says
“We revised the outlook on China Vanke to reflect the increasing likelihood that the tension among the key shareholders and the management team could ultimately weaken the company’s steady business execution and good financial discipline,” S&P wrote on Wednesday. “The power tussle has lasted longer than we anticipated. In our view, there is no clear path to a resolution that could satisfy all stakeholders.”
The negative outlook, first by a major global credit rating agency, is the latest sign that the high-profile battle for control of Vanke has spilled over to affect its financial performance.
Over the weekend, Vanke reported an interim result that missed analysts’ estimates.
Contractors demanded to rescind and revise the terms and conditions of contracts that had been sealed, forcing Vanke to put 31 out of 70 projects on hold, in another sign that the shareholders’ tussle was beginning to weigh on operations, said the developer’s board secretary Zhu Xu.
The downgrade in outlook could potentially make it more costly for Vanke to borrow overseas, even as the developer’s debt level is low.
Vanke may also find it difficult to forge ventures with other developers, crucial in an industry where 70 per cent of land acquisitions are done in partnerships because of the large costs involved.