Clamour for collateral clouds China firm Vanke’s credit pursuit

Vanke seeks funding amid property sector crisis, with lenders scrambling for collateral to support China's second-largest developer.

A rare Beijing directive to help Vanke beat a liquidity crisis has left lenders scrabbling for the assets that the State-backed developer has proposed for collateral, as parties pull out all the stops to arrest deterioration in the property sector.

China Vanke is gasping for funding after sales in both January and February fell below the monthly break-even point of 20 billion yuan ($2.8 billion), meaning cash flowed out of the business, an internal memo showed.

China’s property sector has been in the throes of a crisis since mid-2021. Local policymakers’ stimulus and easing measures have struggled to boost sales or increase liquidity, while many property developers have defaulted on debt obligations.

Reflecting the deepening crisis, regulators asked financial firms and creditors to step up financing support for Vanke — China’s second-biggest property developer by sales — in a rare intervention by central government, Reuters reported last week.

With plunging sales as well as bond prices clouding Vanke’s outlook, the developer has shared a list of mainly commercial projects such as shopping malls and their revenue streams with potential lenders to access fresh credit, said two people with knowledge of the matter.

Those lenders include a group of banks, led by Industrial and Commercial Bank of China (ICBC), which is in early talks to lend as much as 80 billion yuan, two other people said.

Lenders are reviewing as much of the higher-value assets as they can, the people said. At the same time, insurer-creditors have demanded further collateral before agreeing to extensions to the maturities of their debt holdings, said a fifth person. Vanke declined to comment. ICBC did not respond to a request for comment.