Staff Reporter
In a strategic move to bolster its finances, cash-strapped China Vanke has announced that its major shareholder, state-owned Shenzhen Metro, is providing a significant loan of 2.8 billion yuan (approximately $383 million).
As part of the agreement, Vanke will pledge 211.5 million shares—representing 18.3% of its publicly traded property services subsidiary, Onewo Inc.—as collateral, according to a filing made late Monday.
This loan marks the first liquidity support from Shenzhen Metro following a recent management shakeup at Vanke, which has increased state oversight to mitigate risks of non-repayment.
Following the announcement, Vanke’s bonds experienced a notable surge on Tuesday. The offshore bond maturing in May 2025 rose to 97.111 cents on the dollar in morning trading, up from 94.8 cents the previous day. Additionally, its yuan bond due in March 2027 saw a rally of 13.5%.
In a separate filing on the same day, Vanke confirmed its commitment to repay 3 billion yuan in notes maturing on February 16, indicating that it intends to meet its repayment obligations on time.
Analysts view the loan from Shenzhen Metro as a clear signal of the authorities’ efforts to prevent a potential bond default by Vanke, reinforcing the government’s ongoing support for the real estate sector during these challenging times.
In a recent research note, JPMorgan highlighted that Shenzhen Metro’s cash reserves, totaling only 30 billion yuan, may necessitate additional capital injections from the Shenzhen government or prompt state-owned companies to acquire assets from China Vanke.
The brokerage emphasized that Vanke’s liquidity is closely tied to its home sales. “If Vanke’s sales underperform expectations, the funding required for both bond repayments and home deliveries could exceed projections,” JPMorgan stated. “This scenario might lead Shenzhen Metro to consider bond restructuring or extensions as a more practical solution.”
Currently, Vanke maintains a 57% stake in its property services subsidiary, Onewo. The company announced in its filing that it plans to utilize the proceeds from the shareholder loan to repay debts in the open market.
On Tuesday, Vanke’s shares in Hong Kong saw a modest increase of 0.9% by noon, while its shares in Shenzhen dipped by 1.5%. Meanwhile, Onewo’s shares fell by 1.1%.
