China Vanke offers interest payment as it seeks principal extension for yuan bond due December 15

BEIJING/SHANGHAI, Dec 17 (Reuters) - China Vanke is offering to pay 60 million yuan ($8.5 million) in interest by December 22 on a 2 billion yuan bond while seeking a one-year delay to a principal repayment, a filing showed on Tuesday.

The developer is also seeking to extend the grace period for the bond repayment to 30 trading days from five at present, the filing to National Association of Financial Market Institutional Investors showed.

The bond in question was due on December 15 and it has a grace period of five business days.

The developer's first attempt to extend repayment was rejected by bondholders and it is holding a second meeting with bondholders that will start on Thursday and culminate with voting on December 22 at 0200 GMT.

The interest-payment proposal was also on the agenda at the first bondholder meeting, but it was tabled by investors not the company, according to sources with knowledge of the matter. This time, the developer put forward the interest-payment proposal, which some market participants viewed as a sweetening of the terms.

"This proposal marks an improvement on Vanke's initial plan to extend both principal and interest by one year," said Yao Yu, founder of credit research firm RatingDog, adding that issuer-led proposals imposed stronger obligations than those put forward by holders.

The package also seeks a waiver of procedural time limits to speed up the timetable for convening the meeting before the current five-business-day grace period expires; failure to pass the waiver would trigger a default.

Each of the three proposals requires at least 90% approval.

The cash-strapped developer surprised the market last month by seeking a debt extension after billions in loan support from its state shareholder Shenzhen Metro this year.

Vanke's Shenzhen-listed shares were down nearly 1% by midday, while its Hong Kong-traded stock was 1% higher. The developer's onshore bonds were largely trading flat.

($1 = 7.0437 Chinese yuan renminbi) (Reporting by Beijing and Shanghai newsroom; Editing by Stephen Coates and Thomas Derpinghaus)