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China Vanke has scheduled a second meeting with onshore bondholders after failing to secure approval to delay repayment on a 2 billion yuan note due for payment. The move comes as the developer seeks to avoid a default during a prolonged property sector slowdown. Bond prices and equity shares reacted sharply following the rejection of Vanke's earlier proposal, reflecting investor unease. With a short grace period in place and further bond maturities approaching, analysts say negotiations will hinge on stronger credit support or partial early repayment.
China Vanke said it will convene a fresh meeting with bondholders to seek alternatives for repaying an onshore bond, after investors rejected its earlier proposal to extend payment. The developer is attempting to avoid a default on a 2 billion yuan bond, equivalent to USD 283.56 million, which recently fell due and is currently within a five-business-day grace period. Advertisement
According to a filing with the National Association of Financial Market Institutional Investors, the second bondholder meeting is set to begin shortly and will conclude with a formal vote on December 22. The filing followed the failure of Vanke's initial plan, which sought to delay both principal and interest payments by one year without offering additional credit support.
Bondholders were required to provide at least 90% approval for any amendment. The main proposal was rejected after 76.7% of noteholders voted against it. Two alternative proposals that included credit enhancement measures received higher support, with one securing 83.4% approval, but neither reached the required threshold.
In a separate exchange filing, Vanke acknowledged the disruption caused by the attempted rollover of the bond payment and said it would continue discussions with all stakeholders. The company indicated it would review and improve its proposals in order to reach a workable solution that protects the long-term interests of all parties involved.
Market reaction was swift. Vanke's yuan bond due January 2028 fell more than 20% during early trading, prompting a temporary suspension by the Shenzhen Stock Exchange. Another onshore bond maturing in July 2029 declined around 8%. Shares of Vanke also came under pressure, with declines recorded on both the Shenzhen and Hong Kong exchanges.
Analysts noted that investor response to the revised proposals suggests negotiations remain open. Morningstar equity analyst Jeff Zhang said bondholders may now seek stronger credit enhancement or partial early repayment of principal. He added that one proposal had come close to approval, raising the possibility of an agreement within the remaining grace period, although liquidity risks remain elevated.
Vanke's difficulties highlight the ongoing strain in China's property sector, which has faced sustained pressure since 2021. Several high-profile developers have defaulted in recent years, including China Evergrande, once the country's largest builder, which was ordered into liquidation and later delisted. Weak homebuyer sentiment and falling sales have continued to weigh on the sector and the broader economy.
The developer, which is around 30% owned by state-owned Shenzhen Metro Group, had previously been viewed as relatively insulated due to its government backing. However, analysts have warned that a default by Vanke could raise wider concerns about balance-sheet strength and the extent of official support even for state-linked developers.
Vanke also disclosed that interest accrued during the grace period will be calculated on the outstanding principal and unpaid interest, using the bond's coupon rate plus an additional 5 basis points. Separately, the company is seeking bondholder approval to extend repayment by one year on another onshore bond worth 3.7 billion yuan, with discussions scheduled to conclude on December 22.
Source Reuters
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