SHENZHEN: China Vanke Co’s woes are posing a growing risk for investors holding US$1.3bil of the embattled developer’s dollar bonds, as a temporary reprieve this week on local debt still leaves it lurching toward eventual default or restructuring in the absence of any rescue.
Once the country’s largest developer before stumbling under US$50bil of interest-bearing liabilities and an unprecedented real estate market slump, the Shenzhen‑based firm narrowly avoided default Monday on a local note.
Creditors approved a longer grace period but, in a sign that the days ahead will remain fraught, rejected its proposal to extend principal repayment by 12 months.
If Vanke can’t reach an extension agreement with holders on the two billion yuan (US$284mil) note within the extended grace period, or if the firm fails to stave off default on two other local securities in the next few weeks, a cross‑default on its offshore obligations could be triggered, according to a dollar‑bond offering circular seen by Bloomberg.
International investors, including Fidelity International, M&G Investments, HSBC Holdings PLC, BlackRock Inc and UBS Group AG, as well as Chinese-controlled investment firm China Asset Management Co, were among the top holders of the distressed builder’s two outstanding dollar notes maturing in 2027 and 2029, according to the most recent data compiled by Bloomberg.
The data don’t necessarily reflect current holdings, as some might have changed since the filings on which they’re based.
Firms may also hold bonds on behalf of clients. Reported holdings of banks may include those held at asset-management subsidiaries.
Furthermore, Fidelity said in response to a Bloomberg inquiry that it has significantly reduced Vanke bond holdings in recent months and the current allocation is “negligible”.
M&G Investments, HSBC, UBS and China Asset Management declined to comment.
BlackRock didn’t immediately respond to a request for comment.
Vanke, a state-backed builder that has US$160bil of assets and more than 125,000 employees, has been struggling with a liquidity crunch for months. — Bloomberg
