Vanke seeks extension for 2 billion yuan bond.

Author | Zhou Zhiyu Editor | Zhang Xiaoling On the evening of November 26, Vanke welcomed a landmark moment. That night, the National Association of Financial Market Institutional Investors disclosed that Vanke would hold a creditors’ meeting on December 10 to review matters related to the extension of a 2-billion-yuan medium-term note titled "22 Vanke MTN004". This means Vanke will seek to extend its public debt. Over the past two days, Vanke’s stocks and bonds have experienced dramatic fluctuations. On November 27, "22 Vanke 04" fell by more than 41%, "21 Vanke 04" dropped over 36%, both temporarily suspended in trading. In the stock market, as of midday close, Vanke A fell 5.43%, at one point dropping more than 8.8% intraday—its lowest price since 2015. Vanke’s H shares in Hong Kong also fell by more than 4%. Although Vanke has received strong support from major shareholder Shenzhen Metro Group over the past year, Vanke’s operating pressure has yet to be effectively alleviated. From January to September this year, Vanke’s net cash flow from operating activities was -5.889 billion yuan, with a net outflow of nearly 2.8 billion yuan in just the third quarter. Contract sales for the first three quarters fell 44.6% year-over-year, posing a severe challenge to Vanke’s operating cycle. In the first three quarters, net cash flow from financing activities was -20.321 billion yuan. Although major shareholder Shenzhen Metro Group has provided about 30.8 billion yuan in shareholder loans in total, this still hardly suffices given Vanke’s huge scale. Moreover, at the beginning of the year, Vanke still held 88.16 billion yuan in monetary funds on its books, but by the end of the third quarter, this figure had dropped to 65.68 billion yuan. In just nine months, about 22.5 billion yuan in cash reserves were consumed. At the extraordinary shareholders’ meeting on November 20, Vanke’s newly appointed chairman Huang Liping did not shy away from the pressures facing the company. He candidly noted that the company is currently in the “painful period of digesting the burden of the past ‘three highs’ (high leverage, high debt, high turnover),” and admitted that “operating pressure has not yet been effectively alleviated.” Even support from the major shareholder must adhere to strict “market-oriented and law-based” principles. This year, although Shenzhen Metro has boldly provided funds even before procedures were completed—demonstrating great sincerity—and at loan rates better than market levels, these over 30 billion yuan are not given free, but come with the pledge or mortgage of Vanke’s core assets. As quality assets available for collateral gradually decrease and sales continue to struggle, seeking an extension—“trading time for space”—has become Vanke’s necessary and most rational choice. Facing “the coldest winter since the founding,” Vanke is not standing still. Apart from debt restructuring, Vanke is undergoing a painful “cutting to the bone to cure the poison”. On one hand is streamlining the organizational structure: Vanke’s Executive Vice President Li Feng revealed the company has compressed its management levels from “three and a half” to “two”. This is not only about cost reduction but about enabling decisions to reach the front lines more quickly in a crisis. On the other hand, it’s about maximizing existing assets. In the context of sluggish sales, Vanke has shifted its focus to existing assets. In the first ten months alone, Vanke added 22.8 billion yuan in new saleable goods value through methods such as "receiving, adjusting, and supplying" and resource swaps. At the same time, Vanke is accelerating the divestment of non-core businesses. Recently, Vanke has frequently sold off assets, including the much-discussed ice and snow business. As management has stated: “In the future, we will further divest businesses and assets that are not closely associated with the company’s strategic direction.” Risk warning and disclaimer The market has risks; investment needs caution. This article does not constitute personal investment advice, nor does it consider the individual investment objectives, financial situation, or needs of specific users. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their particular circumstances. If you invest based on this, you bear your own responsibility.