China Vanke wins bondholders’ reprieve, averts default for now

China Vanke, once the mainland’s biggest developer before it succumbed to an unprecedented property crisis, won last-minute support from creditors to extend a bond grace period in a reprieve that helps it avoid default, at least for now.

Holders of Vanke’s 2 billion yuan (US$284 million) note voted in favour of a proposal to extend the grace period to January 28, according to a filing to Chinamoney.com on Monday. The company did not pay the security by its December 15 maturity, which left it in a grace period that otherwise would have expired on Monday.

But the challenges are not over. Vanke’s proposal to defer principal payment for 12 months failed to pass, with creditors representing only 20.2 per cent of the outstanding amount voting in favour, short of the more than 90 per cent required. The builder is also trying to persuade investors to accept delayed payment on a 3.7 billion yuan bond that matures on December 28.

Vanke is the last major Chinese real estate firm to so far have avoided reneging on its debts amid the multi-year real estate crisis. Any eventual default at the firm, which has US$50 billion of interest-bearing liabilities, would mark a new phase in the country’s real estate woes that have already prompted US$130 billion of defaults as well as restructurings and liquidations at other developers, including giants like Country Garden Holdings and China Evergrande Group.

A restructuring at Vanke would be among the biggest-ever in China. The builder has roughly US$160 billion of assets and more than 125,000 employees.