Written by Li Gu and Clare Jim
SHANGHAI/HONG KONG (Reuters) – China Vanke bonds recovered on Monday after the state-backed builder said it would redeem its 2027 notes worth 1 billion yuan ($137.68 million) in early March.
Vanke’s announcement boosted investor confidence in its ability to pay off its looming financial debt, including a 3 billion yuan offshore bond due on Monday. Unlike the redemption of the 2027 notes, the company is not required to make disclosures in Monday’s settlement.
Concerns about Vanke’s insolvency have intensified this month as it faces several upcoming debt maturities. It has a total of $3.4 billion due this year.
A state media report earlier this month revealed that the developer’s CEO has been arrested and may be taken over or restructured. The report was removed a few hours after it was published.
In a filing on Friday, Vanke said he will exercise his rights to redeem the 2027 bond in March.
Analysts said investors took the early redemption as a sign that there would be no problem meeting their immediate obligations.
“Announcing the last bond issuance of the first quarter is equivalent to announcing that all quarterly bonds have no default concerns,” said Yao Yu, founder of credit analysis firm ratingdog.
Vanke’s May 2028 offshore bond was quoted up 15% on Monday morning at 73 yuan against a price of 100 yuan.
Bids for its May 2025 dollar bond also rose to 80.608 cents on the dollar from 75.7 cents on Friday.
Some analysts say a debt default is inevitable this year without new financing available as Vanke’s monthly sales fall below bankruptcy levels and he faces difficulties in borrowing from banks and offloading goods. It dropped to fifth in sales last year from second in 2023.
The government in the southern city of Shenzhen, where Vanke is headquartered, is stepping up meetings and communications with local businesses about plans to contain the company’s debt risk and asset disposals, Reuters reported last week.
The developer has been trying to sell a number of assets, including its logistics platform unit GLP and property management unit Onewo, to ease liquidity pressure, the sources said.
It is in advanced talks to sell the VX Logistics fund to Singapore’s GIC fund, and the deal could be finalized as soon as next month, a source told Reuters last week.
All three global rating agencies downgraded the developer deep into the junk this month, citing its financial volatility and uncertain sales outlook for 2025.
($1 = 7.2634 lots)
