Written by Claire Jim and Yu Xie
HONG KONG (Reuters) – Vanke shares and bonds soared on Tuesday after China's second-largest property developer said the impact on its financial operations of a Moody's rating downgrade was “controllable” However, some analysts remain concerned about the company's long-term liquidity.
Moody's on Monday downgraded Vanke Securities from investment grade to “junk” by assigning a corporate family rating (CFR) of “Ba1” and said all ratings of Vanke Securities would be considered for downgrade.
“The company's current management and refinancing are normal and its financing channels are stable,” Vanke said in a statement to Reuters on Tuesday. He also said the impact of the downgrade on financial activities was “controllable.”
Hong Kong-listed shares of China Vanke, the country's second-largest property developer by revenue, reversed early declines to jump 9% as of 0600 GMT, while Shenzhen-listed shares rose 7%, pushing up real estate indexes in both markets. .
The company's 2025 notes sold for 69.592 cents on the dollar, compared with 67.638 cents in the morning, according to data from Duration Finance. The 2029 notes sold for 43.045 cents to 43.925 cents.
Moody's move comes as China has asked banks to step up financing support for state-backed Vanke Bank and asked creditors to consider granting extensions to private debt maturities, Reuters reported earlier on Monday. The measures were taken in response to this.
Chinese authorities are racing to stabilize the real estate sector, which is in the throes of a debt crisis marked by the default of the country's largest real estate company, through support such as increased lending to developers of certain projects. ing.
Vanke is one of the few Chinese development companies with an investment grade rating. If other major rating agencies such as S&P and Fitch follow suit, Vanke's dollar-denominated bonds could be removed from some of the world's most important investment indexes.
“The rating review only affects offshore financing activities, which have been closed for some time,” said Fern Wang, a senior researcher at KT Capital. “Vanke bonds have been trading as junk bonds for some time now, so market reaction to potential actions has been relatively muted.”
broader debt crisis
Analysts say Vanke Bank's repayment problems could undermine market confidence and worsen China's broader real estate debt crisis, which has engulfed peer Country Garden and former market leader China Evergrande. states that it is possible.
“The market is still concerned about Vanke's long-term debt,” said Li Yuan, chairman of Beijing G Capital Private Fund Management Center LLP, which specializes in credit investments.
“The real pressure will start in the second half of this year. Without timely support from shareholders, Vanke will face liquidity depletion as home sales continue to slump.”
Vanke has about 14 billion yuan ($1.95 billion) worth of offshore bonds and about 20 billion yuan of onshore bonds that are due to mature or can be put by June 2025, according to the rating agency.
Moody's said Vanke's financial flexibility and liquidity buffers are expected to weaken over the next 12 to 18 months due to lower contract sales.
“The company continues to be exposed to high refinancing needs and funding volatility, which does not support its investment grade rating,” Moody's said.
The company's sales in the first two months of this year were down 40% compared to the same period last year.
Stocks and bonds were under heavy selling pressure last week after reports that Vanke Bank was facing financial stress and asking some investors to extend debt maturities.
The company said in a filing Friday that it had deposited the funds needed to repay a $630 million dollar bill due Monday.
Vanke is government-backed and 33.4% owned by Shenzhen Metro, which is owned by the Shenzhen State Asset Regulatory Authority.
(1 dollar = 7.1769 Chinese Yuan)
(Reporting by Scott Murdoch in Sydney, Claire Jim, Donnie Kwok and Xie Yu in Hong Kong and Jason Xue in Shanghai; Editing by Christopher Cushing, Stephen Coates and Lincoln Feast)
