Vanke's US dollar bonds fell! Shenzhen Metro tightens loan conditions, requiring collateral

On Monday, Vanke's US dollar bonds fell sharply. According to reports, the Shenzhen Metro requires Vanke to provide guarantees for previous unsecured loans and has set a limit on the total amount of loans to shareholders. This change indicates that the Shenzhen Metro is tightening the financial support conditions for Vanke.

Vanke's latest announcement shows that from the beginning of 2025 until the date of the company's 2025 annual general meeting, the company intends to apply to Shenzhen Metro Group for a loan limit of no more than 22 billion yuan. The loan limit is a one-time credit limit, meaning that within the validity period of the authorization granted by the shareholders' meeting, any repaid principal loans cannot release new loan limits for re-extraction.

Another announcement pointed out that Shenzhen Metro requires Vanke to provide collateral or pledges for unsecured loans worth 20.373 billion yuan to ensure the borrower's debt. If Vanke fails to comply, Shenzhen Metro must demand an immediate freeze on the principal and interest of these loans.

According to documents submitted by Vanke, as of October 30, Shenzhen Metro has provided a total of 29.13 billion yuan in loans to Vanke, meaning that about 70% of the loans are unsecured.

Affected by the above news, Vanke's US dollar bond maturing in November 2029 with a coupon rate of 3.5% fell 8.5 cents to 51.3 cents per dollar today, marking the largest single-day decline since the bond's issuance in November 2019. The US dollar bond maturing in November 2027 with a coupon rate of 3.975% fell 11 cents to 59.5 cents per dollar.

This adjustment comes at a time when Vanke's capital expansion in the third quarter is further increasing, and market concerns about the level of support from Shenzhen Metro have heightened investors' attention to Vanke's liquidity issues.

Credit loans converted to secured loans, clear limit of 2.2 billion

According to an announcement released by Vanke on Sunday night, Vanke has signed a framework agreement with Shenzhen Metro, allowing for a maximum loan of 22 billion yuan from the beginning of 2025 until the Vanke annual general meeting (expected no later than June 30, 2026). As of now, Vanke has utilized 19.71 billion yuan in unsecured or unpledged loans.

This means that Vanke has only about 2 billion yuan of remaining available limits. Even if Vanke repays the shareholder invoices later, it cannot release new limits. Analysts believe that starting from November 2, unless there is a new agreement, Shenzhen Metro's "blood transfusion" support for Vanke has entered the final stage.

At the same time, the announcement also pointed out that starting from November 2, the previous approximately 20 billion yuan in credit loans, along with the future 2 billion yuan that can be borrowed, will require Vanke to provide assets as collateral. Based on a collateral rate of 50% to 70%, the value of the collateral Vanke needs to provide amounts to 31.5 billion to 44 billion yuan After April 30, the RMB 20.373 billion in accounting was purely accounting and was once considered the strongest support from Shenzhen Metro for Vanke. These accounts include RMB 3.3 billion at the end of April, RMB 3 billion in June, RMB 7.139 billion in July, RMB 1.681 billion in August, RMB 3.053 billion in September, and RMB 2.2 billion in October, with Vanke not providing any collateral.

Analysis suggests that this represents a significant shift in Shenzhen Metro's financial support strategy for Vanke. Since April of this year, multiple loans provided by Shenzhen Metro to Vanke have not required asset pledges, and this practice is now changing.

Zhang Jie, a real estate analyst at Morningstar, believes that Shenzhen Metro will continue to support Vanke but may more strictly control the scale of each loan. At the same time, Shenzhen Metro's lending operations will become more standardized, such as requiring collateral or pledges.

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