S&P places China Vanke on watch

S&P said it placed on CreditWatch with negative implications its BBB+ long-term issuer credit rating on China Vanke Co. Ltd., its BBB long-term issuer credit rating on China Vanke's subsidiary, Vanke Real Estate (Hong Kong) Co. Ltd. (Vanke HK), and the BBB long-term issue ratings on Vanke HK's senior unsecured notes.

Weakening property sales and financing conditions could hurt China Vanke's liquidity and leverage, as well as its competitive position, in the agency’s view.

“China Vanke's total sales in January and February 2024 declined about 43% compared with the same two months last year. That was slightly better than the 49% sales decline of China's top 100 developers over the same period. However, China Vanke's competitive edge could be undermined if its sales remain weak going forward,” S&P said in a statement.

If weaker sales continue, the agency warned China Vanke could breach its downside leverage trigger in terms of debt to EBITDA. “As of Sept. 30, 2023, we estimate the company's 12-month rolling leverage was 3.6x, compared with our downside trigger of close to 4x.”

S&P said it aims to resolve the CreditWatch once it has enough information to evaluate China Vanke's measures to manage liquidity and leverage.

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