AdvertisementChina propertyBusinessChina Vanke offshore bondholders face near wipeout in Barclays worst-case scenario
British bank warns recoveries could fall below 1 per cent as restructuring priorities and access to assets remain uncertain
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Cao LiOffshore bondholders of distressed developer China Vanke could face near-total losses in a worst-case scenario, according to Barclays, underscoring the deepening risks in mainland China’s property sector.
In a base-case scenario, bondholders may recover just 10.1 per cent of what they were owed, roughly half what already deeply distressed market prices suggested, the British bank said in a report.
However, in a worst-case scenario, assuming lower proceeds from onshore assets and netting out intragroup balances, the estimated recovery would drop to just 0.9 per cent, Barclays said.
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Furthermore, if banks were paid ahead of offshore bondholders, “then the residual asset pool after satisfying these claims would be insufficient to provide a meaningful recovery for offshore bondholders”, the bank said.
The recovery rates are calculated based on the 2024 financials of Vanke Real Estate Hong Kong, the issuer of China Vanke’s US dollar bonds. Barclays added that the outcome would depend heavily on offshore creditors’ ability to access and enforce claims against onshore assets, and on the priority of claims in a restructuring.
Those estimates are even bleaker than what market pricing suggests. China Vanke’s US dollar bond due in 2027 is indicated around 20 cents on the dollar, while the 2029 note trades near 19 cents.
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