China Vanke's fate hinges on bondholders' amid default risk

By Clare Jim

HONG KONG, Dec 22 (Reuters) - Developer China Vanke is expected to announce the outcome later on Monday of a bondholder vote on its plans to delay the repayment of a 2 billion yuan ($284 million) bond by a year as the company seeks to avoid defaulting on its debts.

The company also ?wants creditors to extend a five-day repayment grace period ending on Monday to 30 trading days. The bond matured on December ?15.

Ever since China Evergrande triggered a debt crisis in the country's massive property sector in ?2021, many developers have failed to make bond repayments without roiling ?markets.

However, analysts said Vanke's ?focus on the country's top-tier cities could knock homebuyer confidence in those locations, where house prices have been stabilising, ?and add to the woes of the wider property ?sector, which once made up 25% of China's economy.

Bondholders rejected an earlier proposal by Vanke to extend repayments.

In its latest offer, Shenzhen-based Vanke sweetened the ?proposal by offering to pay overdue interest ?by the end ?of the five-day grace period later on Monday, its filing last week showed.

"A repayment extension approval would be positive from the market perspective because it would provide ?a template for Vanke's other yuan bonds to follow suit," said Steven Leung, director of UOB Kay Hian.

"If bondholders reject the proposals, Vanke may need to launch a restructuring with haircuts, which is actually more ideal for Vanke because it will be able to cut the size of its debt and ease some repayment pressure."

The second bondholder vote started on Thursday ?and ?concluded at 0200 GMT on Monday. Bondholders expect Vanke to announce the outcome after the market closes on Monday.

In a separate vote, Vanke is also seeking to ?delay the principal and interest payments by a year on a 3.7 billion yuan onshore note due December 28 , and extend the note's grace period to 30 trading days from five days. Voting started on Monday and is due to conclude on Thursday at 0700 GMT.

Shenzhen-listed shares of Vanke had risen 0.6% by 0400 GMT, while its Hong Kong-listed shares were up 1.7%. Its yuan bond prices were little ?changed.

Ratings agency Fitch last week downgraded Vanke's credit rating by two notches to "C", indicating a failure to meet debt obligations, and said it would downgrade the Shenzhen-based developer again to "restricted default" if it fails to pay its debt ?after a grace period.

($1=7.0408 Chinese yuan)

(Reporting by Clare Jim; Editing by Sonali Paul and Neil Fullick)