China Vanke Co. is seeking lenders’ approval to change terms on two offshore loans, people familiar with the matter said, after its finances worsened amid a prolonged property crisis. Vanke has been asking to waive certain covenants on two facilities due near the end of 2026, according to the people, who asked not to be identified as the matter is private. The company has two five-year loans of HK$10.5 billion ($1.35 billion) and HK$5.2 billion maturing December 2026, said one of the people.
In general, waivers are sometimes sought when borrowers are at risk or breaching certain conditions in a debt agreement. This typically occurs when a company is in financial distress and can be a preemptive step to avoid triggering demands for early repayment.
The covenants Vanke has discussed changing concern key ratios that measure potential credit strains: consolidated net debt to consolidated tangible net worth, and the tangible net worth threshold, one of the people said. Approval is needed from lenders holding two-thirds of the loan values for the waivers to go through, the person added.
When asked about the efforts to amend the covenants, Vanke said in a written reply that the news isn’t true, and there isn’t any repayment request triggered.
The development underscores strains at one of the few distressed Chinese developers that has not defaulted amid the unprecedented property downturn.
On Nov. 20, S&P Global Ratings downgraded Vanke to B+ from BB- with a negative outlook as the builder’s progress in reducing debt is slower than predicted, leading to higher leverage. The rating company also expects the developer to prioritize liquidity preservation over deleveraging, and its balance sheet to shrink due to more discounted asset sales and reduction in land acquisitions.
In October, Vanke suffered a 35% drop in contracted sales. Its combined losses for the first nine months of the year amount to 17.9 billion yuan ($2.5 billion) and it has 25.1 billion yuan of onshore and offshore bonds maturing next year, according to data compiled by Bloomberg.
The builder had a short-term refinancing gap of about 12 billion yuan at the end of June due to a spike in long-term debt within a year, according to Bloomberg calculations based on company data. That was the first time its cash balance failed to cover interest-bearing debt maturing in less than a year since at least 2014.
Still, the company has been able to secure funding support. It raised 61.2 billion yuan in the first six months of this year from new funding and refinancing, according to a Bloomberg Intelligence report.
Traders in credit markets are indicating longer-term concerns. While a Vanke dollar note due next year is indicated at about 89 cents, another due in 2027 is at about 58 cents, a level generally considered distressed.
