Shares and notes of China Vanke Co Ltd tumbled on Wednesday after the embattled property developer said it would seek to delay repayment of a 2 billion yuan (USD280 million) onshore bond due next month, heightening concerns that one of China’s largest state-linked builders is edging closer to default.
Vanke’s Shenzhen-listed shares fell to their lowest level in more than a decade in early trading. They closed down 7.1% at 5.47 yuan (USD0.77), while its Hong Kong-listed stock dropped 7.2% to HKD3.60 (USD0.46). The sell-off has intensified in recent days amid growing doubts over the developer’s ability to service its debt.
The company said it will convene a bondholders’ meeting on Dec. 10 to vote on extending the maturity of the note — known as 22 Vanke MTN004 — which is scheduled to come due on Dec. 15. The bond carries a 3% annual coupon, according to a filing with the Shanghai Clearing House.
It marks the first time Vanke has sought to push back repayment of principal on an onshore bond. If creditors reject the proposal, the company faces a potential default.
Trading in the MTN004 note was suspended earlier Wednesday after its price sank more than 30%. Several other Vanke notes also hit their daily trading limits and were halted, reflecting mounting distress across the developer’s debt complex.
A senior analyst at a Chinese credit rating agency told Yicai that Vanke’s move signals its state-owned controlling shareholder, Shenzhen Metro Group, may no longer be positioned to provide a “last-resort backstop,” making some form of restructuring increasingly likely.
Liu Shui, director of corporate research at China Index Academy, said the development suggests Shenzhen Metro may refrain from offering additional unsecured support, forcing Vanke to rely on market-based measures. “Resolving its liabilities will rely mainly on maturity extensions, asset disposals, refinancing and debt-to-equity swaps,” Liu said.
Even if investors approve the extension, thereby avoiding a technical default, the company’s creditworthiness would still take a hit, Liu added. “Confidence among institutional investors will weaken, and future financing will become more difficult.”
Liu noted that most Chinese developers that sought bond extensions in recent years eventually defaulted.
Vanke said it repaid 28.9 billion yuan (USD4 billion) in onshore and offshore bonds as of Sept. 30. However, the company faces another 3.7 billion yuan (USD520 million) medium-term note maturing at the end of December, and roughly 12.4 billion yuan (USD1.74 billion) in local bonds due next year. It also has around 7 billion yuan (USD980 million) in offshore bonds and more than 3 billion yuan (USD420 million) in onshore notes maturing in 2027.
Under severe liquidity stress, Vanke has relied heavily on loans from Shenzhen Metro to fund bond repayments. The state-owned subway operator has already extended nearly 30.8 billion yuan (USD4.3 billion) in unsecured loans this year.
But with the loan amount reaching Shenzhen Metro’s stated ceiling, Vanke must now provide collateral for any further funding. If it fails to do so, Shenzhen Metro reserves the right to demand early repayment of outstanding principal and interest, Vanke warned in a statement last week.
Despite government-backed loans, the company’s financial performance continues to worsen. Vanke’s net loss widened 56% year-on-year to 28 billion yuan (USD3.9 billion) in the first three quarters, with its third-quarter loss nearly doubling to 16.1 billion yuan (USD2.25 billion), according to its latest earnings report.
Operating revenue slid 27% to 161.4 billion yuan (USD22.6 billion) for the nine months ended Sept. 30 — its lowest level since 2018. Third-quarter revenue also fell 27% to 56.1 billion yuan (USD7.8 billion).
