China Vanke Co has swapped some of its privately issued debt held by insurers into asset-backed securities (ABS), as the builder works to further push back already deferred payments, people familiar with the matter said.

The debt, also known as non-standard debt, was swapped this month into newly issued commercial mortgage-backed securities in equal proportions, according to the people, who asked not to be identified as the matter is private. 

The builder, China’s second-largest builder by sales, had been negotiating with insurers after it deferred payments twice since December 2023, when the lenders first asked for early payment. The swap will allow Vanke to move payments to 2027 at the earliest, according to one of the people.

Once considered one of China’s best-managed developers, state-backed Vanke’s liquidity pressures have been under scrutiny as the country’s property crisis drags on. To address market concerns, Vanke earlier this year proposed debt swaps to some creditors with options including swapping non-standard debt to ABS, or swapping bond holdings to secured loans. 

Shares and bonds of the Shenzhen-based builder have soared recently after Chinese banks stepped in with nearly US$4 billion of funding - including a large syndicated loan announced on Thursday.

The total amount of debt that has been swapped wasn’t immediately known as Vanke has held separate talks with each of the insurers, the people said. Insurers see ABS as more secure because they are backed by Vanke’s assets, one of the people said.

Vanke issued 1.4 billion yuan (US$198 million or RM911.97 million) worth of commercial mortgage-backed securities on the Shenzhen Stock Exchange on May 16, with a maximum term of 18 years, according to an exchange filing.  

There was no immediate comment when Vanke was contacted about the swap on Friday.

One Vanke dollar bond due 2029 has climbed to 64.5 cents from a low under 37 cents last month, while the company’s shares in Hong Kong have gained about 72% from an April low.

  - Bloomberg