Indebted property developer China Vanke has secured a 1.55 billion yuan (US$215.4 million) loan from state-owned Shenzhen Metro Group, offering some respite as it looks to meet US$3.4 billion in debt obligations this year.
Shenzhen’s railway operator, Vanke’s largest shareholder with a 27.2 per cent stake, is extending the loan to the cash-strapped developer to help cover interest and principal repayments, according to a stock exchange filing on Wednesday evening.
The loan has a 36-month term and may be extended or repaid early upon mutual agreement. It carries an annual interest rate of 2.34 per cent, below the one-year loan prime rate banks offer to their most creditworthy clients. Repayments are structured with 0.5 per cent due every six months, with the remaining 97 per cent to be settled in the final instalment.
Shenzhen Metro has given Vanke loans totalling 10.3 billion yuan this year, the filing showed. The financial support follows a government-led shake-up in February, when the southern city’s authorities tightened control over the developer by appointing 10 new executives, replacing former CEO Zhu Jiusheng and chairman Yu Liang, who stepped down in January.
The government intervention helped Vanke repay a dollar bond due on Monday, clearing its only such obligation of the year, Bloomberg reported, citing people familiar with the matter.
But the positive development failed to ease growing concerns in the financial markets. Fitch Ratings on Wednesday downgraded Vanke’s bonds further into junk territory, to CCC+ from B-. The agency also downgraded its Hong Kong subsidiary to CCC from CCC+.
