China Vanke, the Chinese state-backed developer that’s become the latest flashpoint in the nation’s property crisis, is in advanced talks with major banks for a loan of about US$6.9 billion, people familiar with the matter said.
If signed, it would be the largest loan in Asia Pacific, excluding Japan, since Taiwan-based National Housing and Urban Regeneration Center’s US$14 billion deal in 2022, according to Bloomberg-compiled data. Talks over the facility, led by Industrial & Commercial Bank of China, began a few months ago after financial regulators instructed the banks to offer funding support to the developer, said the people, who asked not to be identified as the matter is private.
The loan would be backed by about 80 billion (S$14.9 billion) to 90 billion yuan worth of real estate assets, the people added. They are part of an asset package, totalling about 130 billion yuan, that Vanke has been putting together to use as collateral, they said.
The ICBC-led deal would be the second mega loan Vanke received this year. The ongoing talks with the lenders have already resulted in another 20 billion yuan syndicated loan that Vanke signed last week with financial institutions, including China Merchants Bank.
China’s second largest developer, once considered to be one of the more sound players in the sector, particularly given the state-backing, has been raising funds to calm investors’ concern about its ability to stave off default.
Vanke’s 4.2% notes due June 7 climbed to 99.6 US cents on the dollar on Thursday (May 29), according to Bloomberg-compiled data, signalling strong investor expectation for timely payment.
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About six to seven banks plan to participate in the 50 billion yuan facility, including China Construction Bank and Ping An Bank, two of the people said. Proceeds will be used to repay bonds and other private debt, also known as non-standard debt, they said.
Banks are still in the process of choosing collateral for the loan, according to two of the people. The loan is not final and subject to changes, the two people added.
It’s unclear the total amount of assets Vanke used to back the 20 billion yuan loan. But the company pledged about 27 billion yuan worth of shares in unit Vanke Logistics Development to the Shenzhen branch of China Merchants Bank, according to the National Enterprise Credit Information Publicity System.
Vanke didn’t immediately offer a comment when reached Thursday. ICBC, CCB and Ping An didn’t immediately reply to requests for comment.
Talks over the 50 billion yuan loan proposal started as early as March, two of people said. Bloomberg reported at the time that Vanke’s major creditor banks were considering a plan to swap bond holdings worth tens of billions of yuan in principal into secured debt.
The swap, coordinated by China’s financial regulators and the local government of Shenzhen, would help the real estate company avoid a public default while giving banks collateral to protect against any potential losses.
Vanke is also on a selling spree to ease liquidity pressure. It sold this week an unfinished property project, once designated as its new headquarters, to buyers including a major shareholder. The company was also in talks with state-owned investment companies to sell its entire stake in logistics firm GLP, Bloomberg reported in April. BLOOMBERG
