Vanke Challenges Moody's Cut, Preps 130B Yuan Loan Plan

Key Takeaway

• China Vanke contests Moody's downgrade from Ba1 to Ba3, citing strong shareholder support and sales performance.
• Vanke is actively engaging with major brokerages and preparing a 130 billion yuan asset package for new loans.
• Despite Moody's concerns, Vanke maintains a leading industry position with high sales figures, showcasing resilience.

Moody's Downgrade Response

China Vanke Co. has publicly contested Moody's recent downgrade of its credit rating, emphasizing the continuous support it receives from its largest shareholder, Shenzhen SOE, and its robust property sales performance. The company expressed firm opposition to Moody's decision, suggesting that the rating agency failed to fully appreciate Vanke's operational, financial, and liquidity management efforts. The downgrade by Moody's shifted China Vanke's long-term corporate family rating to Ba3 from Ba1, with the agency pointing to anticipated declines in Vanke's credit metrics and liquidity over the next 6-12 months. Vanke's statement raised concerns about the potential market impact of the downgrade, warning of possible market misinterpretation that could lead to increased panic or volatility.

Financial Strategies and Support

In response to growing market concerns regarding its financial health, China Vanke has been proactive in communicating its strategies to manage liquidity and avoid default. The company's leadership, including Chairman Yu Liang and President Zhu Jiusheng, engaged with major brokerages such as Citigroup Inc. and UBS Group AG, reassuring them of Vanke's commitment to leveraging all available financing facilities. This outreach is part of Vanke's broader effort to secure understanding and support from financial institutions amid challenging conditions. Additionally, Vanke is reportedly preparing a substantial asset package worth approximately 130 billion yuan ($18 billion) for collateral purposes in pursuit of new bank loans. The company is also exploring the sale of its entire stake in logistics firm GLP Pte, alongside efforts by some regional units to establish teams for potential asset sales.

Market and Industry Position

Despite the challenges highlighted by Moody's downgrade, China Vanke has maintained a strong position within the property industry, with sales figures that rank among the highest. This performance underscores the company's resilience and the strategic measures it has implemented to navigate the current economic landscape. Vanke's emphasis on the support from Shenzhen SOE and financial institutions reflects a broader narrative of collaboration and strategic maneuvering to bolster its financial standing and operational stability.

Management Quotes

• China Vanke Co. statement:

  "Firmly opposes the decision by Moody’s, arguing that shareholder Shenzhen SOE has made material support continuously, while Vanke’s property sales remain among the highest in the industry... Moody’s rating move didn’t fully take Vanke’s efforts on operating, financing and liquidity into consideration."

• Chairman Yu Liang and President Zhu Jiusheng of China Vanke Co.:

  "The company will make full use of all existing financing facilities," and is receiving understanding and support from financial institutions."