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China Vanke has asked investors to delay repayment of a 2-billion-yuan onshore bond by one year, seeking to avoid default amid the ongoing property market downturn. The company wants to postpone both principal and interest payments while keeping the 3% coupon rate unchanged. News of the request triggered sharp declines in Vanke's yuan bonds, including a 2028 note that fell up to 22%, leading to a trading halt in Shenzhen. This is Vanke's first attempt to extend an onshore bond, and the proposal needs 90% bondholder approval at a meeting on 10 December. With Vanke carrying over 364 billion yuan in debt, opinions remain split on whether investors will support the plan.
China Vanke has asked bondholders to postpone repayment of a 2 billion-yuan onshore bond by one year, in a bid to avoid default amid a prolonged slump in China's property market. The company proposed delaying both principal and interest payments until the same date next year, while keeping the coupon rate at 3 per cent. Advertisement
The bond in question was due on 15 December. Once the request became public, Vanke's yuan-denominated bonds fell sharply one bond maturing in May 2028 fell as much as 22 per cent, trading at 23 per 100 par value. This steep drop prompted a trading suspension by the Shenzhen Stock Exchange.
This is the first time Vanke has sought to delay an onshore bond payment. The company had indicated it was considering an extension earlier, but did not specify the length of delay until now. A bondholder meeting has been scheduled for 10 December, and for the plan to take effect, at least 90 per cent of bondholders must approve.
Vanke carries around 364.3 billion yuan in interest-bearing liabilities. Observers note that its debt burden, combined with falling demand in China's property market, raises doubts about whether the proposed extension will be enough to stabilize its finances.
Market participants are divided over the likelihood of approval. Some believe that without collateral and with an unsecured extension of both principal and interest, the bondholders may reject the proposal. Others think a compromise might persuade enough investors to agree.
Source Reuters
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