Debt-ridden real estate developer China Vanke avoided default on Monday after holders of a bond maturing last week approved extending the grace period to 30 business days. This gives the company time to secure new financing or negotiate an additional extension.
As a result, Vanke has until January 28 to pay a 2 billion yuan ($284 million) onshore bond due last week. Bondholders rejected a separate proposal to extend repayment of principal and interest for another year until Monday.
In a statement released on Monday, Vanke said that despite the longer grace period, payment of the bond will continue to take priority over later maturing bonds. On the same day, Vanke also met with holders of another 3.7 billion yuan bond maturing on Dec. 28, also seeking to extend the maturity by one year. The results of that meeting were not immediately released.
The extension of the grace period is unlikely to allay concerns about the company’s ability to pay its debts. The cash flow crisis at Vanke, whose largest shareholder is state-owned Shenzhen Metro Group, has rattled investors who were counting on government support for one of the country’s biggest developers.
Vanke shares in mainland China rose slightly on Monday ahead of the announcement, while Hong Kong shares fell.
The slowdown in the Chinese real estate market follows the “three red lines” policy announced by Beijing in mid-2020 to contain debt and speculation in the sector. This situation persists despite several government efforts to mitigate its impact, such as reducing interest rates on real estate financing and allowing local governments to purchase unsold properties.
Sales of new residential properties in China in November fell 28% year-on-year in value, according to government data released last week.
About The Author
