Vanke Secures Loan from Shenzhen Metro to Stabilize Finances
China Vanke, the cash-strapped property developer, has received a loan of 2.8 billion yuan ($383.12 million) from its major shareholder, Shenzhen Metro. This move signals the government's increased efforts to stabilize the troubled company.
As collateral, Vanke will pledge 211.5 million shares (18.3%) of its listed property services unit, Onewo Inc. The loan represents Shenzhen Metro's first liquidity support for Vanke after a recent management reshuffle aimed at enhancing state oversight and preventing default risks.
Vanke's bond prices surged following the loan announcement. Its offshore bond due in May 2025 rose to 97.111 cents on the dollar, while its yuan bond maturing in March 2027 gained 13.5%.
In a separate announcement, Vanke affirmed its timely repayment of 3 billion yuan notes maturing on February 16.
Analysts view the Shenzhen Metro loan as a government effort to avert a Vanke bond default. They note the favorable loan-to-value ratio of 70% and the low interest rate of 2.34%.
However, the loan amount is relatively small compared to Vanke's outstanding public bonds of over 30 billion yuan maturing in 2025. JPMorgan anticipates that Shenzhen Metro may inject additional capital or seek asset acquisitions from Vanke to bolster its liquidity.
Vanke's sales performance will also impact its financial stability. If sales decline beyond expectations, it could prompt Shenzhen Metro to consider bond restructuring or extension as a potential solution.
Vanke currently holds a 57% stake in Onewo. The company intends to use the loan proceeds to repay debt in the open market.
Hong Kong-listed Vanke shares rose slightly by 0.9% on Tuesday, while Shenzhen-listed shares dipped 1.5%. Onewo shares experienced a modest decline of 1.1%.