By Clare Jim
HONG KONG (Reuters) -Property developer China Vanke said on Monday its chairman Yu Liang and CEO Zhu Jiusheng stepped down as it forecast a record $6.2 billion net loss for 2024, as concerns over the company’s liquidity deepen.
Xin Jie, the chairman of its major state-owned shareholder Shenzhen Metro, will become Vanke’s chairman, signalling increased state oversight on expectations that the government would step in to contain non-repayment risks as the developer faces several debt maturity deadlines this year.
Yu will remain at the company as executive vice president, while three others from Shenzhen state-owned firms will join in the same role.
A state media outlet reported earlier this month that Vanke’s CEO had been detained and that the firm could be subject to a takeover or reorganisation. The report was deleted within hours of its publication.
Vanke has not commented on the report.
“To effectively mitigate risks and earnestly safeguard the interests of house buyers, creditors and investors, the Board has resolved to strengthen the Group’s management capabilities, leverage the resource advantages of Shenzhen Metro … as the substantial shareholder and other parties,” Vanke said in a filing.
It added that it was experiencing “temporary liquidity difficulties” and pledged to concentrate on its core businesses, along with other measures, to improve its operations.
Vanke said in a separate filing that it expects a net loss of 45 billion yuan ($6.20 billion) for 2024, down from a 12 billion yuan net profit in 2023, hurt by a fall in sales and profit margins, additional provisions for credit and inventory impairments, as well as losses in some bulk asset and equity transactions.
One of the best-known household names in China with many projects across bigger cities, Vanke is currently around a third owned by Shenzhen Metro.
It had previously been viewed as immune to the property market turmoil which saw China Evergrande 3333.HK ordered into liquidation last year following its offshore debt default in late 2021.
Analysts have expressed concern that Vanke’s problems could be the last straw for homebuyer confidence, which has shown signs of stabilising in the past few months, and that banks could further shut financing to the sector, squeezing developers that have not defaulted.
The Shenzhen government has enough resources to help stabilise Vanke’s development via Shenzhen Metro, the Nanfang Daily cited the local state-asset regulator as saying.
The newspaper also cited Shenzhen housing authorities and banks as saying that they will help Vanke’s liquidity via asset disposals and financing.
“Shenzhen SASAC (state-asset regulator) stepping in essentially means a nationalization of Vanke, which is not a bad thing,” said Raymond Cheng, head of China research at CGS International Securities HK.
“Creditors now can be relieved about Vanke’s repayment ability.”
In an immediate show of support, Vanke said in a new filing on Monday it expected to record a 600 million yuan ($82.75 million) profit after transferring all of its income rights and equity rights in a Shenzhen skyscraper project to Shenzhen Metro. Previously Vanke held 49% in the project while the state-owned company held 51%.
Yu was Vanke’s president from 2001 to 2018, before becoming chairman from 2017. Zhu joined Vanke in 2012 and became CEO in 2018.
Vanke’s bonds gained earlier on Monday after it said it would redeem its 2027 notes worth 1 billion yuan ($137.68 million) early in March, as investors were taking the early redemption as a sign it would have no problem meeting its more immediate obligations.
($1 = 7.2606 Chinese yuan renminbi)
($1 = 7.2507 Chinese yuan renminbi)
(Reporting by Clare Jim in Hong Kong Himanshi Akhand in Bengaluru; Editing by Kate Mayberry and Louise Heavens)
