**Exclusive: Insurance Capital Launches New Round of Negotiations with Vanke at Shenzhen Headquarters**
Several insurance companies, including Xinhua Asset Management and China Pacific Insurance, have sent senior executives to Vanke’s headquarters in Shenzhen for a new round of consultations. This move comes as Vanke, one of China’s leading real estate developers, faces a challenging debt repayment situation.
The consultation plans include extending Vanke’s debt repayment period by at least one year, providing additional credit enhancement guarantees and collateral, and converting non-standard bonds into standard bonds. Negotiations between Vanke and insurance companies are still ongoing as of March 10.
While Vanke recently announced the full repayment of a significant note due on March 11, totaling US$647 million, the company’s stock prices have seen a slight decline. The focus of the current round of negotiations is not on US dollar bonds, but on domestic non-standard debt.
A leading insurance investor involved in the negotiations disclosed that since the end of February, Vanke’s chairman, Yu Liang, and executives from Shenzhen Metro have been in talks with several insurance companies. The goal of the negotiations is to ensure that insurance companies do not exercise their rights in advance and continue to fulfill their contracts until the loan expires.
Vanke is working on a debt investment plan with insurance companies, known as a “guaranteed plan.” This non-standard private equity product includes options for early redemption, triggering concerns among insurance capital about potential defaults.
At the negotiation table, insurance companies are pressing for increased asset mortgages and reduced risk exposure from Vanke. The company is also considering a new plan where insurance capital subscribes to publicly raised bonds to replace the existing non-standard debt agreements.
However, the road ahead remains uncertain as both parties continue to wrestle over terms. The insurance funds currently in negotiation hold bond guarantee plans related to Vanke, each totaling several billion yuan. The stakes are high, with the possibility of formal default looming if agreements are not reached.
The negotiations also involve analyzing various variables that could impact Vanke’s ability to navigate its debt obligations. These include potential support from major shareholders, the involvement of central enterprises in asset acquisitions, the success of Real Estate Investment Trusts (REITs), and the impact of policy changes in first-tier cities.
As the discussions continue, the outcome remains uncertain. The financial health of Vanke, a key player in China’s real estate market, hangs in the balance as insurance capital and creditors seek a way forward amidst challenging market conditions.
*(Author: Chen Yueqin, Source: Economic Observer)*
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