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 the central government to help an embattled property firm, two sources said.
The State Council – China’s Cabinet – is coordinating support efforts for China Vanke, said the sources with direct knowledge of the matter, adding that financial institutions have been requested to make swift progress.
Authorities are scrambling to stabilise a real estate sector in the throes of a debt crisis characterised by default among the country’s biggest property firms, with support including boosting financing for developers of certain projects.
However, the central government’s response to individual firms’ woes has been rare, with action taken for Country Garden, but most others tackled at a local level or left to their fate, including one-time market leader China Evergrande, which faces liquidation.
Unlike those two developers, Vanke has government backing, with 33.4 per cent 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 Ratings stripped China Vanke of investment-grade credit rating and warned of potential further cuts, predicting credit metrics and liquidity will weaken because of falling home sales and funding uncertainties.
The rating firm withdrew Vanke’s Baa3 issuer rating and assigned it company a Ba1 corporate family rating, it said in a statement Monday (Mar 11) night. All of Vanke’s ratings are on review for downgrade.
Investors have been selling securities of China’s second-biggest developer by sales amid mounting liquidity concerns. But after Reuters’ report, Vanke’s Shenzhen-listed stock rose 3.1 per cent to 9.46 yuan, the highest since last Tuesday, while its Hong Kong-listed shares climbed as much as 3.4 per cent to HK$5.71.
The CSI 300 Real Estate Index rose 3.3 per cent and the Hang Seng Mainland Properties Index firmed 1.8 per cent.
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 stabilise 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 source told Reuters last week that creditor insurers, including Taikang Insurance, state-owned PICC Property and Casualty and New China Life Insurance, have received requests from Vanke for debt maturity extensions.
To ease repayment concern, Vanke said last Friday that it has deposited funds required to repay US$630 million of US dollar notes due on Monday. REUTERS
