Vanke, a major Chinese real estate company facing management difficulties, decided to grant a 30-trading-day grace period for the obligation to perform on bills worth about 700 billion won that are coming due. This has, for now, averted the risk of default.
According to the Chinese Maeil Business Newspape and other outlets on the 26th (local time), Vanke's bondholder group passed, with a 92.11% approval rate, a plan to extend the grace period for the obligation to perform on yuan-denominated bills worth 3.7 billion yuan (about 763.3 billion won) maturing on the 28th, from the original 5 trading days to 30 trading days.
However, five other Vanke proposals, including the "one-year extension of repayment" plan, were voted down for failing to win 90% approval.
Earlier, on the 22nd, Vanke's bondholder group made a similar decision regarding bonds worth 2 billion yuan (about 412.6 billion won) that had matured on the 15th.
Bloomberg said the move allowed Vanke to once again avoid a default crisis and bought time to craft a solution.
At the same time, it said Vanke's interest-bearing liability stands at 364.3 billion yuan (about 75.1 trillion won), and that liabilities coming due or otherwise payable through the end of June next year amount to about 13.4 billion yuan (about 2.7 trillion won).
It also noted that because of a "cross-default clause," under which a default on one bond triggers defaults on the rest, there could be a cascading effect. About 45% of Vanke's interest-bearing liability is unsecured.
Bloomberg said that if Vanke, with about $160 billion in asset and 125,000 employees, ultimately proceeds to restructuring, it would be one of the largest cases ever in China.
Credit rater S&P Global Ratings on the 23rd downgraded Vanke's long-term credit rating to "selective default," calling the extension of the debt repayment grace period a painful liability restructuring tantamount to default.
Another credit rater, Fitch, on the 24th downgraded Vanke's credit rating from "C" to "restricted default."