HONG KONG, Dec 18 (Reuters) – Cash-strapped China Vanke kicked off a second meeting with holders of a 2 billion yuan ($283.99 million) bond on Thursday, as it scrambles to extend its debt payments with bondholders and banks in an effort to avoid a default.
A default by Vanke, a state-backed developer, would add an additional weight on a property sector that has been in the doldrums for years.
Shenzhen-based Vanke is seeking holders’ approval for a sweetened proposal to delay the repayment by a year and extend a grace period to 30 trading days after its first attempt failed last week. The bond matured on December 15.
It could face default on Monday when a five-business-day grace period expires without getting enough votes on either of the proposals and Vanke would likely need to restructure all of its debt.
Many other major developers, including privately owned Country Garden, have defaulted in the past few years without creating a market meltdown like Evergrande did. But industry experts said a Vanke default could have a more substantial impact because of the company’s focus on China’s top-tier cities. It could weigh on homebuyer confidence in those cities, which had shown signs of stabilisation this year.
Vanke is also making similar proposals for its 3.7 billion yuan onshore note due December 28, a filing showed on Wednesday, seeking to delay the principal and interest payments by a year and extend the note’s grace period to 30 trading days.
In a meeting scheduled for Monday, bondholders will also vote on their own proposals, including credit enhancements by Vanke’s major shareholder Shenzhen Metro or other state-owned enterprises.
Vanke is also talking to commercial banks and insurers. On Wednesday, Vanke asked at least one bank to accept delayed loan interest payments for one year at a meeting in Shenzhen, Bloomberg News reported, citing people familiar with the matter.
In a separate filing on Wednesday, the developer said Beijing-based Hua Xia Bank agreed to extend a 200 million yuan outstanding loan with a Vanke unit for a year.
Ratings agency Fitch on Wednesday downgraded Vanke by two notches to “C” from “CCC-” after the developer entered a grace period for repayment of the bond that was due on December 15.
It added that it would downgrade Vanke again to “restricted default” if the company experiences an uncured expiry of the original grace period or fails to meet any of its debt obligations.
($1 = 7.0424 Chinese yuan renminbi)
(Reporting by Clare Jim; Editing by Thomas Derpinghaus)
Comments