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China Vanke’s stock and some bonds experienced a sharp decline after the company announced plans to request a postponement on the repayment of a CNY2 billion (approximately USD280 million) onshore bond due next month. This move heightens the company’s risk of default amid its mounting debts.
In early trading, Vanke’s shares hit their lowest point in over a decade. They closed the day down 7.1% at CNY5.47 (roughly 77 cents) in Shenzhen and dropped 7.2% to HKD3.60 (about 46 cents) in Hong Kong. The recent decline has accelerated amid growing concerns about the company’s ability to meet its debt obligations.
The company has scheduled a bondholders’ meeting on December 10 to discuss extending the maturity of the debt, specifically the Vanke MTN004 bond, which is set to mature on December 15. This bond, issued through the Shanghai clearinghouse, has an annual interest rate of 3%. If the extension is not approved, Vanke risks defaulting on the repayment.
Trading in the Vanke MTN004 bond dropped over 30% before trading was halted earlier today on the Shenzhen exchange. Several of the company’s other bonds also faced trading suspensions after hitting the daily limit on their price movements.
Sources familiar with the matter suggest that the company’s move indicates its key state-owned shareholder may no longer be able to provide financial support for the debt, pointing toward a potential debt restructuring. Industry analysts speculated that Shenzhen Metro Group, the main shareholder, might stop providing further loans, leaving Vanke to manage its debt mainly through market solutions and internal resources.
Vanke’s options for addressing its liabilities could include extending maturities, selling assets, refinancing, or engaging in debt-to-equity swaps. Even if bondholders approve the extension, which might help avoid a technical default, it could still harm Vanke’s creditworthiness and investor confidence, making it harder for the company to secure future financing. Industry experts note that many property developers who sought bond extensions in recent years have ultimately defaulted.
As of September 30, Vanke had redeemed CNY28.9 billion in bonds both domestically and internationally this year. It faces a CNY3.7 billion medium-term note due at year-end, along with CNY12.4 billion worth of local bonds maturing next year. The company also has approximately CNY7 billion in offshore bonds and more than CNY3 billion in yuan bonds due in 2027.
Due to significant liquidity pressures, Vanke has relied heavily on unsecured loans from Shenzhen Metro to service bond payments. This year alone, Shenzhen Metro has extended nearly CNY30.8 billion in loans to Vanke. However, as these loans have now reached their maximum limit, Vanke will need to provide collateral, or Shenzhen Metro may demand early repayment of both principal and interest.
Despite this ongoing support, Vanke’s financial health continues to deteriorate. The company reported a net loss of CNY28 billion in the first nine months of the year, a 56% increase over the previous year. Its third-quarter loss nearly doubled to CNY16.1 billion. Operating revenue also fell by 27%, totaling CNY161.4 billion (about USD22.6 billion), the lowest since 2018, with the third quarter’s revenue decreasing to CNY56.1 billion.
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