China Vanke units guarantee US$1.1 billion in loans for troubled developer after Fitch Ratings downgrade
- Shenzhen Yili Real Estate Development and Shenzhen Zhongke Wanxin Industrial guarantee the loans, China Vanke said in an exchange filing
- Fitch Ratings on Thursday downgraded the Shenzhen-based developer’s long-term foreign- and local-currency issuer default ratings to “BB-” from “BB+”
Shenzhen Yili Real Estate Development provided a guarantee for a 4.49 billion yuan loan, while Shenzhen Zhongke Wanxin Industrial offered a guarantee for a 3.29 billion yuan borrowing, Vanke said in a Friday stock exchange filing.
The loan arrangement came after Fitch Ratings on Thursday downgraded the Shenzhen-based developer’s long-term foreign- and local-currency issuer default ratings to “BB-” from “BB+” and said the company’s outlook is negative. A negative outlook means there is a greater than even chance for a ratings downgrade over a one- to two-year horizon.
“The downgrade reflects a reduction in China Vanke’s liquidity buffer following the weaker-than-expected sales performance in the year-to-date,” Fitch analysts said.
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“The sustained sales deterioration has affected China Vanke’s nonbank funding access, and the company will increasingly rely on its cash on hand, asset disposals and secured onshore bank financing to address its sizeable debt maturities in 2024 and 2025.”
Fitch’s liquidity concerns came after Vanke had obtained 20 billion yuan in syndicated loans from banks including China Merchants Bank using shares in its logistics unit VX Logistics as collateral, state-owned media reported.
