Chinese property giant Vanke’s proposal to extend the maturity of an onshore bond due Monday (December 15) did not receive enough support from bondholders, intensifying default risk.
According to Bloomberg, this proposal and two other related motions could have allowed cash-strapped Vanke to delay repayment of 2 billion yuan (S$364 million) of bonds by one year.
Vanke’s initial proposal—namely, a 12-month extension of principal and interest without any upfront or installment payments—did not receive any votes in support from bondholders. Two subsequent proposals, which required Vanke to provide credit enhancement measures and pay interest on schedule, received the support of holders representing 83.4% and 18.95% of the outstanding bonds, respectively.
According to an announcement published on the website of the National Association of Financial Market Institutional Investors, none of the three proposals met the required threshold of at least 90% support for approval.
According to an announcement published on the website of the National Association of Financial Market Institutional Investors, none of the three proposals met the required threshold of at least 90% support for approval.
Bloomberg’s report stated that gaining support for the bond extension plan was a crucial step for Vanke to ease liquidity pressures. Without an extension agreement, and if full repayment cannot be made by Monday, Vanke faces an immediate default risk, although according to the bond’s prospectus, the company still has a five-business-day grace period.
Vanke is one of the few large developers in China that has not collapsed amid years of a sluggish property market, but market observers warn that Vanke’s worsening problems may drag down the Chinese economy and further deepen the property sector’s downturn.
Vanke’s debt crisis has become increasingly severe in recent weeks, as its largest state-owned shareholder, Shenzhen Metro Group—which has provided more than 30 billion yuan in shareholder loans to Vanke—tightened financing conditions. This move signals a shift in Shenzhen Metro’s support strategy for Vanke and led to a sharp decline in Vanke’s securities.
Vanke’s debt crisis has become increasingly severe in recent weeks, as its largest state-owned shareholder, Shenzhen Metro Group—which has provided more than 30 billion yuan in shareholder loans to Vanke—tightened financing conditions. This move signals a shift in Shenzhen Metro’s support strategy for Vanke and led to a sharp decline in Vanke’s securities.