Extension Proposal Fails to Pass 90% Creditor Approval Threshold
Evergrande and Country Garden Declare Bankruptcy
Prolonged Slump in China's Real Estate Market... Attention on Government Stimulus Measures
Vanke, a major Chinese real estate developer facing the risk of default, announced that it will improve its proposal to extend the repayment deadline for 2 billion yuan (approximately 420 billion KRW) in debt and will renegotiate with creditors on the 18th.
According to Bloomberg and other sources on December 15, Vanke plans to hold a creditors' meeting on the 18th to put the proposal for a one-year extension of the 2 billion yuan debt, which is due on that day, to another vote. The voting will close at 2 a.m. GMT on the 22nd (11 a.m. Korea Standard Time).
Vanke had previously put three different proposals for the extension of the 2 billion yuan bond repayment to a creditor vote, but none of the proposals received the required 90% approval to pass. According to Bloomberg, one of the three extension proposals, which would have postponed the principal and interest repayment by 12 months without any prepayment or installment payments, did not receive a single vote in favor.
As a result, Vanke must repay the debt within the five-business-day grace period or reach a separate agreement to extend the repayment deadline. If the grace period passes without repayment or another agreement, creditors may declare a default.
In China, major real estate firms such as Evergrande and Country Garden have recently gone bankrupt. Evergrande was delisted from the Hong Kong Stock Exchange in August. The wave of bankruptcies among real estate developers is due to the prolonged downturn in the property market. According to a recent Reuters survey, Chinese home prices are expected to fall by 3.7% this year and drop by an additional 2.8% next year.
Amid this situation, Vanke, which had been considered a relatively sound construction company, has seen its financial situation deteriorate as the real estate slump continues in China. Vanke's largest shareholder is the state-owned enterprise Shenzhen Metro, which holds about a 30% stake. However, Shenzhen Metro also expressed opposition to the debt repayment extension on December 14.
Separately, Vanke has also requested a one-year extension on the repayment of another 3.7 billion yuan (approximately 770 billion KRW) in debt maturing on the 28th. The creditors' meeting for this will be held on the 22nd.
As concerns in the real estate market intensify, the Chinese government is expected to announce measures to stabilize the property market at the annual Central Economic Work Conference scheduled for mid-December. President Xi Jinping and Communist Party leadership will attend this meeting.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
