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China Vanke bonds drop as developer wants to delay bond repayment by one year

China Vanke bonds fell on Tuesday, after the developer sought to defer a bond repayment for one year.

China Vanke, formerly the top homebuilder in China by sales, has been trying to avoid default after a prolonged real estate slump that has affected all of its main competitors.

Shenzhen Stock Exchange suspended trading early after a yuan bond with a maturity date of May 2028 dropped by as much as 22 per cent to 23 par value. The developer's exchange traded bonds are all at similar prices.

Three sources said that Vanke had asked bondholders of a 2 billion Yuan ($283 millions) bond due to mature on December 15, whether they could delay principal and interest payments till the same date next year. They said that the coupon would remain at 3 percent during the extension.

China Vanke, a company owned by Shenzhen Metro to the tune of 30%, has declined to comment.

This would be the first time a developer has requested a delay for an onshore bond. The company announced the extension last Monday without revealing how long it wanted to delay. The proposal must be approved by 90% of bondholders at a meeting scheduled for December 10.

The market is divided over whether bondholders would approve the plan.

According to one source, bondholders are unlikely to approve a loan without collateral, or if the principal and interest payments were made in a straight-forward, unsecured manner.

A second source stated that investors were clearly not happy with the plan for extension, but it may still be approved after stakeholders reach a compromise.

As the matter is confidential, we have not named the person.

Bloomberg was the first to report on Monday that an extension plan had been announced. Reporting by Beijing and Shanghai Newsroom, Editing by Christopher Cushing & Sonali Paul.

(source: Reuters)