Vanke seeks debt swap

China Vanke (2202) is in talks with banks on a debt swap that would help the cash-strapped developer stave off its first-ever bond default, according to people familiar with the matter.

Vanke’s major creditor banks are considering a plan to swap bond holdings worth tens of billions of yuan in principal into secured debt, sources said. The swap would help China’s second-largest real estate company avoid a public default while giving banks collateral to protect against any potential losses.

According to mainland media, Vanke might be able to receive a total of 80 billion yuan (HK$87.22 billion) from 12 Chinese commercial banks for debt repayments, though the lenders remain conservative.

Vanke is reported to be in talks with the debt-holding insurers and hopes they will not ask for early repayment.

Moody’s canceled Vanke’s Baa3 Issuer rating and put all ratings on a downgrade watch.

Hong Kong-listed shares of Vanke, the country’s second-largest property developer by sales, closed up 10.3 percent, while its Shenzhen-listed shares rose 5.7 percent. The property indexes in each market rose 8 percent and 5 percent, respectively.

On mainland China’s property market, Wharf’s chairman Stephen Ng Tin-hoi thinks the gap between top-tier cities and the lower tiers remains huge this year. Ng added that Beijing concentrates on home delivery and might not support problematic developers.

So Wharf will not buy land in mainland China until the situation becomes clearer, said Ng.

Meanwhile, Country Garden (2007) said 237 of its projects have been included into “whitelists” for local government’s support, which involves over 1.5 billion yuan.