(Bloomberg) -- China Vanke Co.’s sales slump worsened in November, adding to concern over its worsening finances during a prolonged property crisis.
Contracted sales for November declined 34.4% from a year earlier to 20.1 billion yuan ($2.8 billion), widening from a 22.8% drop in October, corporate filings show.
The sales drop underscores the strains at state-backed Vanke, one of the few distressed Chinese developers that have yet to default during the unprecedented property downturn. The government’s efforts to stem the sector’s decline have yet to materially reinvigorate homebuyer demand.
Concern over Vanke’s liquidity resurged after the developer posted its first loss in two decades in August. Its combined losses for the first nine months of the year amounted to 17.9 billion yuan.
Vanke has been seeking lenders’ approval to waive certain covenants on two offshore loans, Bloomberg reported last month. In general, waivers are sometimes sought when borrowers are at risk or breaching certain conditions in a debt agreement.
Bloomberg Intelligence has cautioned that Vanke’s solvency in 2025 and 2026 could be increasingly at risk if the sales slide drags on. Vanke has 25.1 billion yuan of onshore and offshore bonds maturing next year, according to data compiled by Bloomberg.
S&P Global Ratings downgraded Vanke to B+ from BB- with a negative outlook in November, saying the builder’s slow progress in reducing debt is leading to higher leverage. The ratings company expects the developer to prioritize liquidity preservation over deleveraging, and sees its balance sheet shrinking due to more discounted asset sales and a reduction in land acquisitions.
Traders in credit markets are indicating longer-term concerns. While a Vanke dollar note due in March next year is indicated at about 89.2 cents, another due in 2027 is at about 57.8 cents, a level generally considered distressed.
--With assistance from Foster Wong.
©2024 Bloomberg L.P.
