Vanke maintains a total of 6 US dollar bonds, with a balance of US$2,953 billion; it maintains 32 domestic bonds, with a size of 54.609 billion yuan, of which 10 billion yuan will expire within one year.
Finance Association, Feb. 20 (Editor Yang Bin) Vanke sold shares in its company to a Shenzhen state-owned enterprise after selling Shanghai's Qibao Vanke Plaza at a 26.3% discount. Vanke has not defaulted on domestic or foreign open market bonds so far, but in the face of poor sales and financing environments, it has not planned ahead to dispose of assets not related to its main business to ease liquidity pressure. Last year, when it was downgraded by two major rating agencies, Fitch and Moody's, Vanke's US dollar debt plummeted and received strong support from the Shenzhen State-owned Assets Administration Commission.
After selling high-quality commercial assets, it also sold Sun Company shares to Shenzhen state-owned enterprises
Recently, Vanke sold some of its assets. On February 9, Lingzhan Real Estate Fund (00823.HK) announced that it intends to acquire the remaining 50% interest in Shanghai Property Qibao Vanke Plaza at an estimated base price of 2,383.8 billion yuan. Shanghai Qibao Vanke Plaza is Vanke's first shopping center in Shanghai. The property has a high-quality and diverse merchant portfolio, and the occupancy rate has remained stable at around 95%. According to the latest valuation report as of the end of January 2024, the property was valued at RMB 7.060 billion. Vanke is now selling it at a discount of about 26.3%.
In addition, the Financial Services Association learned from “iQicha” that Shenzhen Yingda Investment Fund Management Co., Ltd., a wholly-owned subsidiary of Vanke, sold 6.16% of its shares in Shenzhen Hi-Tech Investment Group Co., Ltd. (“Shenzhen Hi-Tech Investment”) to Shenzhen Investment Holdings Co., Ltd. (“Shenzhen Investment Holdings”) on January 30. The direct shareholding ratio of Shenzhen Investment Holdings in Shenzhen Hi-Tech Investment increased from 39.65% to 45.81%. Shenzhen Investment Holdings is 100% owned by the Shenzhen State-owned Assets Administration Commission.
Figure: Shenzhen Hi-Tech Investment Stock Change Record
(Source: iQI Research, compiled by the Financial Association)
Currently, Shenzhen Metro Group Co., Ltd. (“Shenzhen Railway Group” for short) is still Vanke's largest shareholder, holding 27.18% of the shares. Shenzhen Railway Group is 100% owned by the Shenzhen State-owned Assets Administration Commission.
Figure: Vanke's top ten shareholders
(Source: Choice data, compiled by the Financial Federation)
Poor sales and financing environment
As a leading domestic housing enterprise with a state-owned background, Vanke's actions have attracted much attention. Although there has never been a debt default, in the face of an unfavorable sales and financing environment, Vanke may plan ahead to dispose of assets not related to its main business to supplement liquidity.
According to Vanke's latest business report, in 2023, Vanke's cumulative contract sales area was 246.60 million square meters, and the contract sales amount was 376.12 billion yuan, down 6.2% and 9.8%, respectively. Meanwhile, in January 2024, Vanke achieved a contract sales area of 1.254 million square meters, with a contract sales amount of 19.45 billion yuan, a year-on-year decrease of 25% and 32.1%, respectively.
In terms of assets and liabilities, as of the end of the third quarter of 2023, Vanke had total assets of 1646.702 billion yuan, total liabilities of 1239.574 billion yuan, and a balance ratio of 75.28%, of which current liabilities were 940.47 billion yuan. In addition to contract liabilities, it was mainly accounts payable of 248.937 billion yuan and other accounts payable of 161.94 billion yuan, and 47.491 billion yuan in non-current liabilities due within one year. Vanke has an account capital of 103.68 billion yuan, which is quite adequate for short-term debt coverage.
However, Vanke's monetary capital continued to decline, and the net net outflow of financing cash flow continued, indicating that its external financing environment was poor.
Figure: Net cash flow from Vanke's fund-raising activities (100 million yuan)
(Source: Choice data, compiled by the Financial Federation)
It was downgraded by an international rating agency, but was strongly supported by the Shenzhen State-owned Assets Administration Commission
Vanke has not defaulted on domestic or foreign open market bonds so far, but last year it was continuously downgraded by international rating agencies, causing shock.
On October 17, 2023, Fitch downgraded the default rating of Vanke's long-term local and foreign currency issuers from BBB+ to BBB, with a stable outlook; and downgraded the senior unsecured rating of its wholly-owned subsidiary Vanke Properties Hong Kong and its unpaid premium notes from 'BBB+' to 'BBB'. Fitch said that Vanke's medium-term leverage ratio will remain above 35%, and its sales performance is weaker than expected, which may curb cash generation and deleveraging efforts.
On November 24 of last year, Moody's downgraded Vanke's issuer rating from “Baa1” to “Baa3”; downgraded the supported advanced unsecured rating of its wholly-owned subsidiary Vanke Hong Kong's winning plan from “(P) Baa2” to “(P) Ba1”; downgraded the supported senior unsecured rating of bonds issued by Vanke Hong Kong from “Baa2” to “Ba1”; the rating outlook is negative. Moody's said that the downgrade was based on Vanke's poor contract sales performance. The performance in the first ten months of 2023 was lower than the market. It is expected that its credit indicators and liquidity buffers will weaken over the next 12-18 months.
Moody's also said that it is still uncertain whether Vanke will be able to obtain long-term unsecured financing in a timely manner. With significant future refinancing required, this uncertainty will limit Vanke's financial flexibility and make its rating performance inferior to other peers at the same rating level. The negative outlook reflects a high degree of uncertainty about Vanke's ability to improve business performance and restore financing channels under challenging industry prospects and difficult financing conditions.
According to the Enterprise Alert, Vanke currently has a total of 6 US dollar bonds, with a balance of 2,953 billion US dollars. Among them, “Vanke 5.35 2024-03-11,” which has a balance of 630 million US dollars, is about to expire. There are as many as 32 domestic bonds in stock, with a scale of 54.609 billion yuan, of which 10 billion yuan will expire within one year, including “210,000 Technology MTN002” and “210,000 Technology MTN003,” which will all expire within 2024.
Figure: “Vanke 5.35 2024-03-11” net price trend in the past year
(Source: Enterprise Warning Pass, compiled by the Financial Association)
In October of last year, Vanke's US dollar bonds experienced significant fluctuations. On November 6, Vanke held an online exchange meeting with financial institutions. More than 150 major domestic and foreign financial institutions and funders attended the conference. At the meeting, the Shenzhen State-owned Assets Administration Commission stated that Vanke has sufficient security, no financial risks or management risks, and is an important member of the Shenzhen State-owned Assets Administration System. After receiving strong support from the Shenzhen State-owned Assets Administration Commission, Vanke's domestic and foreign bonds gradually stabilized.