Chinese real estate giant Vanke has averted default risk for now. The grace period on 2 billion yuan (about 421.1 billion won) of debt that came due on the 15th has been extended until mid-next month.
Reuters reported on the 22nd that creditors approved Vanke's request to extend the grace period for its bonds to 30 business days from 5.
As a result, Vanke has gained time until the 27th of next month to renegotiate with creditors the conditions to delay debt repayment. However, Vanke's parallel proposal to push back the debt repayment deadline by one year was voted down by creditors.
Vanke initially proposed to creditors a one-year extension of the 2 billion yuan debt repayment deadline, which had been due on the 15th, along with credit enhancement and compliance with interest deadlines. But it failed to obtain the 90% of votes needed for passage in the creditors' ballot held over three days from the 10th to the 12th.
In response, Vanke presented a new compromise. It proposed paying the 60 million yuan (about 12.6 billion won) in interest that had been scheduled for the 15th by the 22nd, and extending the grace period from 5 days to 30 days. Creditors held a vote on this proposal from the 18th to the 22nd.
If Vanke fails during the extended 30-business-day grace period to repay the debt or reach a separate agreement to postpone the repayment deadline, the bond in question (22 Vanke MTN004) will face default.
Separately, Vanke has also requested a delay in repaying 3.7 billion yuan (about 779.1 billion won) of debt maturing on the 28th. It asked to extend the repayment deadline by one year and lengthen the grace period to 30 days from 5. A creditors' meeting and vote to discuss this agenda will be held from today through the 25th.
Vanke had been considered a relatively safe investment because a state-owned enterprise is its largest shareholder. In China, major real estate firms such as Evergrande and Country Garden Holdings Company Limited have fallen into default in recent years.
However, Vanke posted a loss of 49.5 billion yuan (about 10.4 trillion won) last year, followed by a loss of 28 billion yuan (about 5.9 trillion won) in the first to third quarters of this year. Vanke's interest-bearing liabilities total 364.3 billion yuan (about 76.2 trillion won), larger than the defaults of Evergrande and Country Garden that previously ran into trouble.
This has raised concerns that Vanke's troubles could bring another crisis to China's property market.