China Vanke says it has plans in place amid short-term liquidity pressure

By Clare Jim

HONG KONG (Reuters) -State-backed property developer China Vanke said it is facing short-term liquidity pressure and operational difficulties, but added that it has prepared "a basket of plans" to stabilise its business and cut debt.

Vanke's Hong Kong-listed shares closed down 0.8% on Monday after hitting a record intraday low, while its Shenzhen-listed shares edged up 0.6%, stabilising after nine consecutive sessions of decline.

Investors have been selling off Vanke's shares and bonds in the past few weeks on liquidity concerns, triggering a rare central government directive to help the Shenzhen-based company.

Adding to its woes, S&P last week became the last of the major credit rating firms to strip its investment grade status.

In a Sunday meeting with analysts hosted by Chairman Yu Liang and CEO Zhu Jiusheng, the developer said it had the support of Shenzhen's state asset regulator as well as its largest shareholder, state-owned Shenzhen Metro, after reporting its situation to them, according to a filing that summarised comments made by the company.

It also said at the meeting it is preparing an asset package totalling about 130 billion yuan ($18 billion) to use as collateral as it seeks new bank loans, Bloomberg News reported on Monday.

Vanke declined to comment on the report.

Analysts said the market will closely watch whether Vanke will be able to refinance as it plans, because banks are reluctant to extend credit in the current environment.

"Financial problems will take time to solve, but the fact that the management came out yesterday to explain the situation has eased some speculation that it was in trouble," said Steven Leung, director of UOB Kay Hian.

The developer last week confirmed Chinese media reports that an executive based in the northeastern city of Jinan had been taken away by police for an investigation, but said on Sunday authorities had told the company the probe was over a personal matter unrelated to Vanke.

The developer also said it had filed a lawsuit for defamation against a business partner who accused management of financial misconduct, including making personal gains from the business.

The firm promised in the meeting to complete projects and deliver apartments on time.

Vanke said last month it aimed to boost its cashflow by slashing debt by 100 billion yuan over the next two years, and the Shenzhen state asset regulator was coordinating with several state-owned companies to help its cashflow.

Vanke will likely address its liquidity pressure through the Shenzhen government providing new financial support to cover maturing public bonds through 2025 and fund its operations, UBS analysts said in a report on Friday.

"We estimate Vanke's cash at project company and subsidiaries level was 65.3 billion yuan as of end 2023 ... it may be enough to support cash outflow for 9.9 months, if no market rebound," the analysts said.

($1 = 7.2385 Chinese yuan renminbi)

(Reporting by Clare Jim; Editing by Jamie Freed and Mark Potter)