Vanke gets 2.8 billion yuan loan from state owner for debt repayment

China Vanke (2202) won more support from authorities as its largest state shareholder agreed to provide up to 2.8 billion yuan (HK$2.99 billion) to help the struggling developer repay outstanding debt.

Shenzhen Metro, which holds a 27 percent stake in Vanke, signed a three-year secured loan agreement with the firm on Monday, according to a filing to the Hong Kong stock exchange. Under the deal, Vanke will provide asset collateral with a value as much as 4 billion yuan to Shenzhen Metro as security. Vanke will also pledge an 18 percent stake, or about 211.5 million shares, in its property management services unit Onewo (2602) as part of the asset collateral, it said.

“This fully reflects Shenzhen Metro’s support for the company,” Vanke said in the filing, adding that the loan agreement “would be the most effective way to raise funds for the group.”

The financial backing from Shenzhen Metro follows Vanke’s overhaul in late January when two top executives stepped down and the company warned of a record US$6.2 billion (HK$48.36 billion) loss. An official from Shenzhen Metro will take over as chair, while local and state governments in Vanke’s home base of Shenzhen vowed to “proactively support” its operations.

The rare state support signaled that Vanke may be too big to fail, which would have significant implications for China’s housing market and economy. Vanke, which employs about 130,000 people, ranked fifth by sales in 2024.

The loan facility pays a floating interest rate of 76 basis points below the one-year loan prime rate. The initial loan-to-value ratio of the asset collateral is about 70 percent, which is higher than the prevailing market standard that ranges from 30 percent to 60 percent.

BLOOMBERG