Vanke’s Bond Selloff Signals Growing Worries About Debt Payments

(Bloomberg) — China Vanke Co., long considered a bellwether of the country’s property market, is facing a deepening bond selloff as worries grow about its mountain of debt coming due and a property crisis that remains entrenched despite government rescue efforts. 

Vanke’s 3.15% dollar note due 2025 was down 16.9 cents to 59.7 cents so far this week as of Thursday in Hong Kong, and is poised for its largest weekly drop in more than a year, according to Bloomberg-compiled data. Trading was halted on two of Vanke’s yuan bonds this week after prices on each fell 20%.  

Vanke, one of the country’s largest property developers, has $4.9 billion in yuan- and dollar-denominated bonds maturing or facing redemption options in 2025, its highest annual amount ever, and the most for any Chinese developer this year, according to Bloomberg-compiled data. The obligations account for more than half of its outstanding public debt. 

“Bondholders are concerned about Vanke’s ability to repay its upcoming onshore bond and make coupon payments in January and February,” said Zerlina Zeng, head of Asian strategy at Creditsights Singapore LLC.

Vanke has around 9 billion yuan ($1.2 billion) of onshore notes maturing in the first quarter of the year, with the first payment on Jan. 27.

The developer’s challenges highlight the continuing slump in China’s property market. Beijing has taken measures such as cutting borrowing costs lowering taxes on home purchases, but the overall housing sector has shown minimal signs of recovery. Sales from the top 100 builders fell 28.1% last year compared with a 16.5% drop in 2023. 

Vanke told Bloomberg News earlier that it will make all efforts possible to deal with its public debt obligations this year. Vanke will continue to raise funds on the operating and financing sides, including through home sales, asset sales and exiting non-core businesses, it has said. 

In a worst-case scenario where Vanke defaulted, concerns could spread to other areas. “More market participants would question China’s support measures and further underweight China in their bond portfolio,” said Zeng. “This would also make it difficult for high yield and lower-quality China issuers to tap the Asia dollar primary market,” she added. 

–With assistance from Shuiyu Jing.

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