China Asks Large Banks to Support Vanke in Rare Intervention, Sources Say

Reuters

12:15 JST, March 12, 2024

HONG KONG/SHANGHAI/BEIJING (Reuters) – China has asked banks to enhance financing support for state-backed China Vanke and called on creditors to consider private debt maturity extension, in a rare intervention from central government to help an embattled property firm, two sources said.

The State Council – China’s cabinet – is coordinating support effort for China Vanke 000002.SZ, 2202.HK, said the sources with direct knowledge of the matter, adding financial institutions have been requested to make swift progress.

Authorities are scrambling to stabilize a real estate sector in the throes of a debt crisis characterized by default among the country’s biggest property firms, with support including boosting financing for developers of certain projects.

However, central government response to individual firms’ woes has been rare, with action taken for Country Garden2007.HK but most others tackled at a local level or left to their fate, including one-time market leader China Evergrande3333.HK, which faces liquidation.

Unlike those two developers, Vanke has government backing, with 33.4% owned by Shenzhen Metro, a company held by Shenzhen’s state asset regulator.

It is also one of few remaining Chinese property developers whose credit is rated as investment-grade by international credit-rating firms, so any debt repayment trouble could decimate market confidence, analysts have said.

Moody’s however late on Monday withdrew Vanke’s “Baa3” issuer rating, and placed all ratings on “review for downgrade.” It said its rating actions reflect concern over Vanke’s ability to recover its sales and improve its access to funding.

Investors have been selling securities of China’s second-biggest developer by sales amid mounting liquidity concern. But after Reuters’ report, Vanke’s Shenzhen-listed stock rose 3.1% to 9.46 yuan, the highest since Tuesday, while its Hong Kong-listed shares climbed as much as 3.4% to HK$5.71.

The CSI 300 Real Estate Index .CSI100952 rose 3.3% and the Hang Seng Mainland Properties Index .HSMPI firmed 1.8%.

The sources, who requested anonymity due to the sensitivity of the matter, said regulators met financial institutions and creditors but did not specify when.

“Banks to ensure (China Vanke’s) financing, insurers to extend maturities for private debt, (every party) to guarantee the repayments of public bonds,” said one of the sources.

Vanke declined to comment. The National Administration of Financial Regulation and the State Council Information Office did not respond to requests for comment.

“The central government wants to show a gesture that it is actively rescuing the market. It is loosening up so the banks should do it too,” said Alvin Cheung, associate director of Prudential Brokerage in Hong Kong.

Cheung said authorities have not been able to stabilize the market after Evergrande defaulted, and if Vanke defaulted after Country Garden, there would be no confidence or new liquidity left in the market.

Another person with knowledge of the matter said some large national commercial banks have made repayment requirements stricter for Vanke, adding to its financial stress.

Total new bank loans issued to the developer in the fourth quarter of last year slumped by more than half from the same period a year earlier, the person said.

A separate person told Reuters last week that creditor insurers including Taikang Insurance, state-owned PICC Property and Casualty 2328.HK and New China Life Insurance 601336.SS have received requests from Vanke for debt maturity extensions.

To ease repayment concern, Vanke on Friday said it has deposited funds required to repay $630 million U.S. dollar notes due on Monday.