Vanke Enterprise Co., Ltd. (Vanke) recently announced that its controlling subsidiary, Wuhan Yutian Xingye Land Development Co., Ltd., has obtained a two-year extension for a 2.04 billion yuan financing. However, industry insiders have pointed out that Vanke is facing significant debt pressure in 2025, with tight cash flow.
According to the announcement made on January 9th, Wuhan Yutian Xingye Land Development Co., Ltd. had previously financed 2.04 billion yuan through a real estate debt investment plan with the New China Asset Management Co., Ltd. (New China Asset) with Vanke providing joint and several liability guarantee for the financing. The guarantee period has been extended by two years until December 31, 2026.
The announcement also mentioned that Vanke continues to provide unconditional and irrevocable joint liability guarantee for this financing, with an amount of 2.04 billion yuan, and Vanke’s Wuhan project Vanke Golden Domain International has been used as collateral to provide additional credit enhancement measures to New China Asset Management.
As of December 31, 2023, Wuhan Yutian had total liabilities of 5,317.42 million yuan and net assets of 3,522.67 million yuan. From January to December 2023, the total profit was -3.8094 million yuan, with a net profit of -2.9221 million yuan. As of November 30, 2024, Wuhan Yutian’s total liabilities were 4,676.81 million yuan, and net assets were 3,488.78 million yuan. From January to November 2024, the total profit was -42.5791 million yuan, with a net profit of -33.895 million yuan.
While the extension sends a positive signal to the market, Vanke’s bond volatility continues to draw attention. Bond volatility is crucial for Vanke’s bond repayment confidence and reflects the debt pressure Vanke faces.
According to reports on January 12 from the China News Weekly, on January 9, several of Vanke’s domestic bonds fell, with “22 Vanke 02” plummeting over 15% and “22 Vanke 06” dropping over 6%. On January 10, the downward trend continued, with “21 Vanke 06” prices falling to a record low of 57 yuan. In terms of USD bonds, on January 8, Vanke’s USD bond due in November 2027 experienced the largest drop since April 12 of the previous year.
Liu Shui, Director of Corporate Research at the China Index Research Institute, stated that real estate bonds to some extent reflect market confidence in companies. The recent decline in Vanke’s bond prices may indicate current market concerns about Vanke’s liquidity.
The latest financial data from Vanke up to September 30, 2024, shows that the company’s short-term debt increased from 62 billion yuan at the end of 2023 to 116.8 billion yuan. With a cash flow of only 79.745 billion yuan, insufficient to cover its short-term debt, Vanke’s cash-to-short-term debt ratio is only 0.66, indicating a shortfall in its short-term debt repayment capability.
According to the bond market data software DM Bond View, in 2025, Vanke has a total of 16 domestic public bonds maturing or exercisable, with a total outstanding principal of 32.64 billion yuan. There are also two foreign bonds maturing, with a total outstanding principal of approximately 6.64 billion yuan.
Pengpai News reported on January 9 that the first quarter of 2025 will be a peak debt repayment period for Vanke, with 9.89 billion yuan of domestic public bonds needing to be redeemed. In the first quarter of 2025, Vanke has four domestic bonds maturing, with a total outstanding amount of around 9 billion yuan, and in the second quarter, there will be two maturing foreign bonds (VNKRLE 3.15 05/12/25, VNKRLE 3.55 06/08/25), with an outstanding balance of approximately 3.6 billion yuan.
According to corporate early-warning data, as of January 10, Vanke’s outstanding bond size was 48.743 billion yuan, with a total of 30 bonds. The majority have maturities of 1 to 3 years, with outstanding amounts within 1 year reaching 17.89 billion yuan, most with face rates above 3%, slightly higher than other real estate bonds of similar ratings and terms.
Additionally, Vanke’s peak overseas bond repayment will be in May 2025, requiring the repayment of 455 million USD.
With the Chinese authorities and financial institutions tightening loans to real estate companies, sales receipts have become the main source of self-owned funds for real estate enterprises. Continued sluggishness in the Chinese real estate market has put pressure on Vanke’s finances.
In the first three quarters of 2024, Vanke recorded revenue of 219.9 billion yuan, a year-on-year decrease of 24.3%. The net profit attributable to shareholders was a loss of 17.943 billion yuan, a decrease of 231.7% year-on-year, indicating a continuing decline in sales. During the same period, Vanke accumulated contract sales area of 13.308 million square meters and contract sales amount of 181.20 billion yuan, down by 26.8% and 35.4%, respectively.
Huang Lichong, CEO of Huisheng International Capital, told China News Weekly that 2025 will be a “peak year for debt repayment” for Vanke. Considering the significant short-term debt pressure, Vanke may need to rely on external financing and asset liquidation to maintain liquidity. Despite having a large amount of cash on hand, deductions for presale regulatory funds limit the actual usable funds for Vanke. Insufficient sales receipts may further exacerbate liquidity tensions. Rating downgrades have increased financing costs for Vanke in international capital markets.
According to a report from Caixin on January 9, due to the increase in Vanke’s capital market debt maturing in 2025 and the decrease in company sales and cash flow generation, Vanke is expected to face operational pressures this year.
Since 2024, Vanke has been selling off assets to increase its cash flow, including divesting a 50% stake in Shanghai Qibao Vanke Plaza, Shenzhen Bay Super Headquarters Base land plot, and 48% stake in Shanghai Nanxiang Impression City MEGA. In the first half of 2024 alone, Vanke raised 9.34 billion yuan through the sale of commercial real estate projects.
Regarding future financing for real estate developers, Liu Shui, Director of Corporate Research at the China Index Research Institute, mentioned: “From the perspective of real estate financing, since the second half of 2021, the industry has been in an adjustment cycle, with financing significantly falling from the second half of 2024, continuing the declining trend from the previous year. Although financing policies were relatively loose in 2024, bond financing showed a downward trend. The uncertainty of market recovery has increased investor doubts about the real estate industry, leading companies to adopt a cautious approach to new financing, resulting in a continued reduction in financing scale.”
As of January 13, 11:50 Beijing time, Vanke was trading at 4.81 Hong Kong dollars per share, with a total market value of 57.387 billion Hong Kong dollars.