Vanke gets 42b yuan loan from state backer to repay debt

China Vanke Co. received another round of financial support from authorities, with its largest state shareholder planning to offer up to 4.2 billion yuan (HK$4.5 billion) to help the distressed developer repay outstanding debt.

Shenzhen Metro Group, which holds a 27 percent stake in Vanke, plans to provide a three-year term loan facility to be guaranteed by up to 6 billion yuan-worth assets, according to a Friday filing to the Shenzhen Stock Exchange. The proposed financing followed a 2.8 billion yuan loan offer last week also from the state-backed metro operator, highlighting the government’s support for the struggling developer.

Vanke is facing financial problems this year as the cash-strapped developer has US$4.9 billion of bonds maturing or facing redemption options at a time of slumping home sales and limited access to fresh liquidity. The local government of Shenzhen last month stepped in to take management control of Vanke, which warned of a record US$6.2 billion loss for 2024, and vowed to “proactively support” its operations.

Chinese authorities are working on a proposal to help Vanke plug a funding gap of about 50 billion yuan this year, people familiar with the matter told Bloomberg earlier. Under the plan, regulators would allocate 20 billion yuan of special local government bond quota for the purchase of unsold properties and vacant land from Vanke, said the people, asking not to be identified discussing private information.

The new proposed loan facility pays a floating interest rate of 76 basis points below the one-year loan prime rate, or about 2.34 percent as of the announcement date. The proposed asset collateral of up to 6 billion yuan is subject to shareholders’ approval and the initial loan-to-value ratio is at about 70 percent.

BLOOMBERG