Will something happen to Vanke too?

At a time when various debts are due intensively, Shenzhen Vanke, a leading real estate company, is in a liquidity crisis. The picture shows a community of Vanke in Shenzhen, Guangdong. (Internet).

Vanke is one of the few leading real estate companies that has not defaulted on its debts publicly. If Evergrande is too leveraged, and Country Garden is in the layout of third- and fourth-tier cities, then Vanke can be regarded as a stable style without obvious flaws.

In addition, Vanke's largest shareholder is the state-owned Shenzhen Metro Group, which has the dual blessing of business and background, and many investors believe that Vanke should be the last bastion of domestic real estate.

However, in the past three months, the company has been frequently involved in negative news, frequently discounted high-quality assets, and launched debt negotiations with various creditors ......It shows that the top students have also come to the time of the catastrophe.

Earlier this month, rumours broke down that Vanke's debt extension talks with several creditors and that Vanke might be about to default, leaving both Vanke's share price and bonds **. The creditor denied it, and Vanke also responded on Tuesday (March 5) that it had a 6$300 million with a coupon rate of 5For 35% of the US dollar bonds, all funds have been put in place, and the debt repayment work is being arranged in an orderly manner.

On Wednesday, Vanke's Hong Kong stock was slightly **073% to 5HK$5, still the lowest point in five years.

At the end of October last year, negative rumors about Vanke began to ferment, and US dollar bonds fell by 20% at one point, and domestic bonds were also affected.

After a week in a row, Vanke convened a number of financial institutions to hold an online exchange meeting. At the meeting, Wang Yongjian, director of the Shenzhen SASAC, said that Vanke is an important member of Shenzhen's state-owned assets system, and if Vanke encounters extreme risks in its operation, the SASAC will definitely use funds and resources to do everything possible to help Vanke keep the bottom line through marketization and rule of law.

With the strong support of Shenzhen State-owned Assets Supervision and Administration Commission, Vanke's domestic and foreign bonds gradually stabilized. However, in March this year, many of Vanke's onshore bonds fell again, with the largest decline of 35%.

According to Bloomberg, a number of insurance companies in China have issued internal warnings about Vanke's debt risk. Two of the insurers asked investment managers to keep a close eye on Vanke's credit risk, while the other asked its pension managers to reduce Vanke's exposure.

A number of insurance companies are also creditors of Vanke, providing Vanke with about 40 billion yuan of non-standard bonds through the bond guarantee plan. Reuters quoted anonymous sources as saying that under debt pressure, Vanke has asked Taikang Insurance, Taiping Insurance and Xinhua Insurance to extend its debt this month.

There are market rumors that Xinhua Insurance rejected the extension request, and Xinhua Insurance denied the news last Sunday (March 3), and said that it is full of confidence in the current economic development and resolutely supports the healthy development of the domestic real estate industry. However, the next day, Vanke's double kill of stocks and bonds showed that Xinhua Asset's statement did not convince the capital market.

Caixin quoted a trader as saying that in addition to Xinhua Insurance, Vanke obtained insurance funds from investors, as well as Dajia Insurance, Taiping Insurance, Taikang Asset ......Some insurance companies are under pressure themselves, and there are also many third-party funds, including occupational annuities and corporate pensions. Therefore, "it is very troublesome to talk about the extension, and it is not that the insurance company can renew it if it wants to".

According to the report, Vanke previously had two bond guarantee plans to be extended for three months under regulatory coordination, but now the three-month statute of limitations has expired and negotiations are still continuing.

Bond protection plans are privately placed types of debt. In terms of public debt, Vanke will mature 17 billion yuan in the first half of the year and 12.6 billion yuan in bonds in the second half of the year.

At the end of the third quarter of last year, Vanke's monetary funds were 1036800 million yuan, and at the end of 2022, Vanke's monetary funds will exceed 200 billion yuan, and in less than a year, the hand-held funds will be reduced by half.

However, among the more than 100 billion yuan, excluding pre-sale regulatory funds and other restricted funds, there are only more than 60 billion yuan of available funds, which can just cover short-term liabilities and non-current liabilities within a year of 51.1 billion yuan. The Caixin report pointed out that if the outflow continues, Vanke's cash flow will be tighter.

Sales remain a major drag. According to the data of CRIC Research Center, Vanke's contracted sales fell by 9% year-on-year last year8%, sales fell by 32% and 53% in the first two months of the year, respectively5%, with monthly sales of less than 20 billion yuan. However, even with such a decline, Vanke still sits firmly in the second place in the country's real estate sales, which can be seen in the low market sentiment.

Faced with the pressure of repaying debts, Vanke began to discount its assets. In December last year, Vanke sold its stakes in three Banyan Tree hotels, returning only 4800 million in cash. In February this year, Vanke took a 50% stake in Shanghai Qibao Vanke Plaza, its No. 1 commercial project in terms of revenue, to 238.4 billion yuan, nearly 7% off**, sold to Hong Kong Link**.

In February this year, Vanke sold 50% of the equity of its No. 1 commercial project in terms of revenue, Shanghai Qibao Vanke Plaza, to Hong Kong Link REIT at a nearly 70% discount. The picture shows the main entrance of the commercial plaza. (Internet).

According to a report released by Fitch, an international rating agency, in 2024, the principal amount of bonds that domestic real estate companies need to repay at maturity will reach 737.3 billion yuan, an increase of 113%。Bond maturities peaked in March and August.

The above situation does not include real estate enterprises that have previously been out of insurance and have completed debt restructuring or extension. Fitch estimates that the insured property developers plan to repay the principal amount of RMB10.9 billion in 2024, higher than the 2023 quota. In the case of sluggish sales, the probability of secondary insurance is very high.

According to the data of the National Bureau of Statistics, in January this year, the month-on-month decline in commercial residential sales in 70 large and medium-sized cities narrowed as a whole and continued to decline year-on-year. The data map shows that on January 5, people learned about real estate information at a sales office in Beijing.

* The work report also did not mention "housing for living, not speculation" for two consecutive years. * The prime minister said in the report that it is necessary to effectively prevent and resolve the risks of high-quality leading real estate enterprises, improve the asset-liability situation, and prevent disorderly expansion; The reasonable financing needs of real estate enterprises with different ownership systems should be supported without discrimination, so as to promote the steady and healthy development of the real estate market.

The report also proposes new directions for real estate development, including increasing the construction and supply of affordable housing, promoting the construction of public infrastructure for both ordinary and emergency purposes, and the transformation of urban villages.

According to the analysis, this means that the official is also deeply aware that risk prevention is the bottom line, and on the basis of resolving risks, new policies will be introduced and the "three major projects" will be promoted.

This is also a realistic choice. After all, the current debt risk of the real estate industry is still accelerating the clearance, enterprises are still having a headache for the maturity of debts, and the local government needs to be careful to prevent the spread of financial risks, and for the new directions such as the construction of affordable housing and the transformation of urban villages that cost trillions of dollars, both sides may not be ready in terms of energy and financial resources.