Vanke Aims to Sell 21.4% GLP Stake Amid $18B Loan Move

China Vanke aims to sell 21.4% stake in GLP for liquidity amid debt crisis, exploring asset sales and legal challenges for recovery.

By Barry Stearns

4/17, 03:13 EDT

Key Takeaway

  • China Vanke Co. seeks to sell its 21.4% stake in GLP Pte for $2.5 billion amid a debt crisis, with talks ongoing but no deal yet.
  • Vanke is preparing a $18 billion asset package for new loans and has seen credit downgrades due to cash flow concerns.
  • Legal action by Z&L Properties highlights challenges in the property sector, including foreclosure risks over unpaid dues.

Vanke Seeks to Divest GLP Stake

China Vanke Co., a prominent state-backed developer, is actively looking to sell its entire stake in logistics firm GLP Pte as part of its strategy to accumulate cash amidst a looming debt crisis. The company, which acquired a 21.4% stake in GLP for approximately S$3.4 billion ($2.5 billion) in 2018, has engaged in discussions with various parties, including state-owned investment company Guangdong Holdings Ltd. and a Tianjin-based state-owned firm. However, these talks have yet to culminate in an agreement. This move comes as Vanke aims to navigate through the challenges posed by the nation's property downturn, with the company's executives, including Chairman Yu Liang, recently conveying plans to address liquidity pressures and operational hurdles.

Financial Strategies Amidst Liquidity Concerns

In response to the ongoing property crisis and economic slowdown in China, Vanke has expressed a willingness to sell or pledge any non-core assets under favorable terms to secure necessary funding. This includes setting up teams across some of its regional units to explore potential asset sales. Despite the uncertain market conditions, GLP has demonstrated financial resilience by redeeming two dollar bonds worth over $600 million in recent months. The price of GLP's 3.875% dollar notes due in June 2025 has seen a significant recovery, indicating a level of confidence in the company's financial health.

Vanke's Debt Management Efforts

Vanke is also preparing an asset package valued at approximately 130 billion yuan ($18 billion) to serve as collateral for new bank loans. This initiative is part of a broader strategy to manage its debt obligations, including discussions with banks to convert bond holdings into secured debt. Such measures aim to prevent a public default while providing banks with collateral against potential losses. However, credit rating agencies have recently downgraded Vanke to junk status, citing concerns over its cash flow and the impact of declining home sales on its financial stability. The company faces a significant challenge in 2025, with 36.2 billion yuan of onshore and offshore bonds maturing.

Legal Challenges and Asset Recovery

Z&L Properties, a China-based developer, has initiated legal action against bidders and Nationwide Reconveyance, a trustee, for violating a court restraining order during an auction of 10 condominiums in Downtown San Jose. The condos, whose market value exceeds $1 million each, were auctioned for between $31,500 to $32,300 to collect unpaid HOA maintenance fees. Z&L Properties, which faces foreclosure for failing to pay homeowner association dues, has a 90-day window to regain ownership of the units by settling the outstanding dues, late fees, and penalties. A court hearing is scheduled for May to address violations of the temporary restraining order.

Management Quotes

  • Yu Liang, Chairman of Vanke:

    "It’s making plans to resolve liquidity pressure and short-term operational difficulties." "It is willing to sell or pledge any non-core assets for funds as long as terms are appropriate."