Written by Claire Jim
HONG KONG (Reuters) – State-backed property developer China Vanke says it is facing short-term liquidity pressures and operational difficulties, but has announced a “series of steps to stabilize its business and reduce debt.” He added that he is preparing a plan for
Vanke's Hong Kong-listed shares fell more than 1% in late Monday trading after hitting a record low, while Shenzhen-listed shares rose 0.6%, stabilizing after nine consecutive sessions of decline.
Investors have sold Vanke's shares and bonds in recent weeks over liquidity concerns, prompting an unusual directive from the central government to support the Shenzhen-based company.
Adding to the woes, S&P last week became the last of the major credit rating agencies to be stripped of its investment-grade status.
In a Sunday meeting with analysts hosted by chairman Yu Liang and CEO Zhu Jiusheng, the developer briefed Shenzhen's state-owned assets regulator and its largest shareholder, state-run Shenzhen Metro, on the situation, according to reports. After doing so, he said he received their support. A document summarizing comments made by the company.
Analysts said the market will keep an eye on whether Vanke can refinance as planned as banks are reluctant to extend credit in the current environment.
UOB Kay Hian director Stephen Leung said: “It will take time to resolve the financial issues, but the fact that management came out yesterday and explained the situation has helped to dispel some speculation that we are in financial trouble.'' It's soothing,” he said.
The developer last week confirmed Chinese media reports that an executive based in the northeastern city of Jinan had been taken to police for investigation, but on Sunday authorities said the investigation was based on a personal investigation unrelated to Vanke. He said he told the company it was related to the issue.
The developer also announced that it had filed a defamation lawsuit against a business partner who accused management of financial wrongdoing, including profiting personally from the business.
The company promised at the meeting to complete the project and hand over the apartments on time.
Vanke Financial last month said it aims to increase cash flow by reducing debt by 100 billion yuan ($13.82 billion) over the next two years, and the Shenzhen State-Owned Assets Regulatory Authority said it would increase cash flow by cutting debt by 100 billion yuan ($13.82 billion) over the next two years. He said he is working with companies.
UBS analysts said in a note on Friday that Vanke Bank will address liquidity pressures by providing new financial support to the Shenzhen municipal government to cover its bonds maturing until 2025 and fund operations. He said it is likely.
“We estimate Vanke's cash at the project company and subsidiary level to be 65.3 billion yuan at the end of 2023. Absent market recovery, this may be enough to support 9.9 months of cash outflows. '' said the analysts.
(1 dollar = 7.2382 yuan)
(Reporting by Claire Jim; Editing by Edwina Gibbs and Jamie Freed)
