Vanke may adopt a familiar playbook in China to tackle debt crisis, say analysts

By Clare Jim and Li Gu

HONG KONG/SHANGHAI, Dec 23 (Reuters) - State-backed China Vanke volition apt reflector the strategies of immoderate different cash-strapped Chinese developers and question aggregate short-term extensions for its enslaved repayments earlier yet proposing a indebtedness restructuring, recognition analysts said.

Vanke amazed the marketplace ​last period by seeking a nationalist enslaved hold for its 2 cardinal yuan ($284 million) enactment owed December 15 by a twelvemonth contempt getting a ‌loan infusion of 22 cardinal yuan from large shareholder Shenzhen Metro, a institution owned by the Shenzhen government, this year.

That effort failed and bondholders again resoundingly rejected Vanke's sweetened connection connected Monday to hold ‌repayment. But the developer narrowly dodged a default arsenic they approved a program to widen the grace play of the enslaved repayment to 30 trading days from five.

Vanke's proposals required astatine slightest a 90% support complaint to pass. The grace play hold program achieved 90.7%, portion the sweetened connection that offered to wage overdue involvement and adhd recognition enhancements to postpone main payments was rejected with 78.3% opposing it.

The overwhelming rejection complaint shows bondholders were disappointed by the deficiency of upfront currency outgo and main amortisation, ⁠analysts said, arsenic they saw successful erstwhile cases wherever ‌developers had repeatedly extended repayments erstwhile they became due.

They expected akin voting results for Vanke's 3.7 cardinal yuan onshore enactment owed December 28, successful which the developer is besides seeking to hold the main and involvement payments by a twelvemonth and widen the ‍note's grace play to 30 trading days. Voting started connected Monday and is owed to reason connected Thursday.

"It is yet up to Vanke to determine whether to instrumentality the proposal. So, execution hazard is high," said Zerlina Zeng, caput of Asia recognition strategy astatine CreditSights.

"We deliberation Vanke whitethorn petition to widen the grace play aggregate times until it enters a holistic ​debt restructuring."

A Shanghai-based capitalist who sold disconnected his Vanke yuan bonds earlier this period besides expected the steadfast to default sooner oregon later. "Credit enhancement won't help; ‌just look astatine different developers similar Sunac," helium said.

In a landmark woody successful precocious 2024, aft respective repeated enslaved extensions, Sunac projected a debt-to-equity swap and steep haircuts for its onshore debt, with an purpose to chopped the indebtedness size by much than half. It implemented the woody this year.

TEST CASE

Hit by a liquidity situation since 2021, China's highly indebted developers began tackling the restructuring of offshore bonds successful 2022. But for politically delicate onshore bonds, they person repeatedly extended maturities, pinning their hopes connected a pickup successful currency travel that has failed to materialise truthful far.