Vanke Is Said to Have Prepared Cash for Yuan Bond Payment

Developer China Vanke (2202), which has a record amount of debt coming due, told some creditors prior to turbulence in the company’s bonds and shares on Friday that it has prepared enough cash to repay a 2.95 percent yuan bond due January 27, said people familiar with the matter.

The bond has 3 billion yuan (HK$3.19 billion) outstanding, according to Bloomberg-complied data, and last traded at 98.4 yuan on Wednesday, indicating investors’ confidence that payment will be made. That’s in contrast to its 3.45 percent yuan bond due in May, which was at 73 yuan on Friday.

Vanke didn’t immediately offer a comment Friday.

It isn’t clear when or whether the builder will remit funds to repay the January 27 note, said the people, who asked not to be identified, citing private conversations.

Vanke, one of the five largest builders in China by sales last year, is facing growing concerns amid questions on the status of chief executive Zhu Jiusheng and after a local news report that it may be seized by state authorities. Zhu answered a call from a local reporter at media outlet Cailian, several hours after the Economic Observer reported he had been taken away by police. That report was later deleted.

The company has about US$4.9 billion (HK$38.22 billion) in bonds maturing or facing redemption options in 2025, its highest annual amount ever, and the most for any Chinese developer this year. The company’s shares tumbled to the lowest level since September in Hong Kong on Friday and some of its dollar bonds fell to record lows.

Other Vanke bonds maturing in February are also indicated at near-par levels, signaling full repayment expectations, but most bonds due after the first quarter have fallen into distressed territory, as some investors start to price in default possibilities, according to Li Kai, founding partner of Beijing Shengao Fund Management.

Despite a flurry of government support for the property market, Vanke has seen a sharp decline in home sales. Once regarded as too big to fail due to its government backing and ties with China’s financial system, Beijing has yet to signal its stance toward the property giant.

As of the end of September Vanke’s interest-bearing liabilities totaled 327.6 billion yuan, according to an exchange filing. Of those, more than a third carried maturities of less than a year.

(Bloomberg)