It is reported that Chinese real estate developer Vanke (Vanke), which was driven into a default (default) crisis, was denied loan support by two large banks. As the bankruptcy aftermath of major real estate companies such as Hengda (Evergrande) and Biguiyuan (Country Garden) weighed down the Chinese economy for several years, there is growing concern that the real estate shock could become a reality if even Wanker falls into a liquidity crisis.
According to Bloomberg News Agency on the 28th, Wanker negotiated loans with two banks to secure short-term liquidity, but they all ended without success. As financial pressure intensified ahead of the maturity of 2 billion yuan (about 415.7 billion won) bonds on the 15th of the following month, they found a bank but were unable to obtain cooperation. Although the largest shareholder, the state-owned company Shenzhen Metro, went directly to the negotiations, it is reported that both banks showed a passive attitude. Earlier, on the 26th of this month, Wanker announced that it would delay the repayment of 2 billion yuan of bonds.
Until now, Shenzhen Metro has provided funds worth 30 billion yuan (approximately 6.236.4 trillion won) to Wanker and acted as a safety net so that bonds can be repaid. However, as Shenzhen Metro recently announced its intention to strengthen loan conditions along with management changes, uncertainty about whether support will be maintained is growing. Liquidity pressure on Wanker is expected to increase. Of Wanker's bonds, about 13.4 billion yuan (approximately 2.785.6 trillion won) will expire by June next year, or is facing early repayment options.
In recent years, the real estate industry in China is one of the biggest Achilles tendons. It was once a key sector that accounted for about 30% of the gross domestic product (GDP), but after the collapse of the bubble, large companies faced management difficulties, and a domino default occurred. At one time, the debt of Hengda, which was rated as the No. 1 real estate company in China, reached 2 trillion yuan (approximately 415.76 trillion won), and other companies such as Biguiyuan also collapsed, leaving huge debts. During this process, the Chinese economy is entering a long-term downturn, so if even Wanker collapses, it could have a serious impact on the economy as a whole.
If Wanker declares a default, the impact is likely to be different from the bankruptcy of existing private companies. Wanker, where Shenzhen Metro is the largest shareholder, is actually classified as a state-owned enterprise, and expectations were high that central and local governments would eventually play a supporting role. However, if it goes bankrupt, even trust in the government can be shaken. “The extension of bond maturity shows that the Shenzhen government's funding line has actually been closed,” said Leonard Lowe, an analyst at Luke Rolle Analytics. “It is a sign that the government no longer has the will or ability to support Wanker's debts.”
Anxiety is spreading across the market. On this day, some Wanker bonds plummeted by more than 40% during the day. Wanker shares, which plummeted 7.13% in the Shenzhen stock market the previous day, also fell by more than 1% on this day.
