Chinese Authorities Plan to Aid Vanke Amid Funding Gap
Bloomberg reports that Chinese authorities are developing a proposal to assist China Vanke Co. in addressing a funding shortfall estimated at 50 billion yuan ($6.8 billion) for 2023, demonstrating government support for the embattled developer.
Proposed Plan:
* Regulators will allocate 20 billion yuan in special local government bond quotas to purchase unsold properties and vacant land from Vanke.
* Vanke and its subsidiaries may access additional financing sources, such as bond issuances and bank loans, for debt repayments.
Background:
* Vanke faces a funding gap due to $4.9 billion in maturing bonds and a slowdown in home sales.
* Beijing aims to prevent Vanke from sharing the fate of China Evergrande Group and other defaulters.
Market Impact:
* Vanke's bonds have rebounded following news of the proposed support measures.
* Shares of Vanke and its industry peers have also seen gains.
Challenges:
* Despite the proposed assistance, Vanke's total liabilities stand at approximately 982 billion yuan.
* Moody's Ratings has downgraded Vanke's credit rating to Caa1, citing weak liquidity and financial results.
Government Intervention:
* Shenzhen Metro, Vanke's largest shareholder, has injected 2.8 billion yuan into the company.
* Authorities have replaced Vanke's top leadership to oversee its restructuring.
Economic Context:
* Housing remains a drag on China's economy, with sales continuing to decline in January.
* The government is prioritizing the stability of state-backed developers like Vanke to maintain market confidence.