Investing.com -- S&P Global Ratings has placed the ’B-’ long-term issuer credit ratings of China Vanke Co. Ltd. and its subsidiary, Vanke Real Estate (Hong Kong) Co. Ltd. (Vanke HK), on CreditWatch. This decision, announced on March 5, 2025, is due to changes in management and an evolving liquidity situation.

The China-based property developer is facing increasing liquidity challenges this year. The secured shareholder’s loans provided by Shenzhen Metro Group Co. Ltd. to China Vanke were timely but insufficient to fully address these liquidity strains. In February 2025, Shenzhen Metro provided Chinese renminbi (RMB) 7 billion of loans to China Vanke. However, the company still has RMB9.9 billion of onshore bonds due in the first quarter of 2025.

China Vanke’s parent-level cash, a major liquidity source, falls significantly short of its bond maturity wall, which is equivalent to more than RMB36 billion in 2025. Between January and February 2025, China Vanke repaid RMB8 billion of its maturing bonds.

The company has undergone significant management changes since late January 2025, with Shenzhen Metro’s chairman, Mr. Jie Xin, also assuming the role of chairman of the board of directors of China Vanke. Additionally, at least 14 individuals from Shenzhen Metro or Shenzhen-government-related entities have joined China Vanke in senior management positions.

China Vanke’s contracted sales have weakened, dropping 43% year on year to RMB11 billion in January 2025, a greater decline than the average 3% among China’s top 100 developers over the same period. This drop in sales is expected to result in a net operating cash outflow for the first quarter of 2025.

To address its upcoming bond maturities in 2025, China Vanke will need to replenish liquidity through various means. These may include executing on cash collection from noncore asset disposals, further disposing of assets, and obtaining asset-pledged loans.

China Vanke could potentially receive RMB21.6 billion over the 12 months to Sept. 30, 2025, from contracted asset disposals. The company has also recently spun off some of its rental apartment assets into a pre-REIT fund, currently valued at RMB1.6 billion.

S&P Global Ratings expects to resolve the CreditWatch as soon as more details about China Vanke’s liquidity management plans become available. However, the ratings could be lowered if China Vanke’s liquidity further deteriorates, its access to financing channels diminishes, or if it fails to execute its asset disposal plans.

On the other hand, the ratings could be upgraded if Shenzhen Metro provides timely and sufficient extraordinary liquidity support, or if China Vanke swiftly executes material asset disposals or obtains significant new financing by pledging its assets.

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