Chinese property giant China Vanke is making a final push to avoid default, seeking to extend the grace period for a critical 2 billion yuan ($283.56 million) bond payment after its initial proposal was rejected. The state-backed developer will ask bondholders later this week to approve extending the grace period from five to 30 business days, sources told Reuters, with a formal meeting set for Thursday and a vote on December 22.
This crisis at a major, partially state-owned firm has intensified fears over China's beleaguered property sector, coinciding with broader economic slowdown signals. Vanke apologized to investors for the disruption but faces a severe market reaction: its bonds plunged up to 26% and its shares fell sharply after bondholders rejected its first plan to delay payment by a year.
CREDIT RISK AND NEGOTIATIONS
The first proposal, which required 90% approval, was rejected with 76.7% opposed. Two other plans with credit enhancements fared better but still failed to meet the threshold. Analysts see this partial support as a basis for negotiation. Mark Dong of Minority Asset Management expects a deal, as "a deal is better than default," but notes bondholders will push for maximum concessions. Morningstar's Jeff Zhang said bondholders may demand more credit support, warning that Vanke's "credit risk remains elevated" due to its reliance on external liquidity.
FINANCIAL TROUBLE AND BROADER IMPACT
Vanke's struggle is a stark development for a firm once considered relatively safe due to its ~30% ownership by state-owned Shenzhen Metro. Its failure would send shockwaves through a sector already devastated by defaults, including Evergrande's liquidation. The crisis continues to dampen homebuyer sentiment and economic growth, with new home prices falling again in November.
Vanke is also seeking to extend repayment on a separate 3.7 billion yuan bond due December 28. The outcome of this week's negotiations will be a critical test of confidence in even the most prominent names in China's troubled real estate market.
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Source: REUTERS