(Yicai) June 9 -- China Vanke said its largest shareholder Shenzhen Metro Group will provide a CNY3 billion (USD417 million) loan, the fifth in four months, to help repay the property developer's debt.

The three-year loan carries a 2.34 percent interest rate, which is less than China's benchmark one-year loan prime rate of 3 percent, the Shenzhen-based builder said in a statement on June 6. The rate is the same as for the previous three loans, when the LPR was 3.1 percent.

Shenzhen Metro Group became Vanke’s largest shareholder in 2017 and has played a stabilizing role during times of financial distress. The state-owned rapid transit operator extended two loans to Vanke in February, one for CNY2.8 billion and the other for CNY4.2 billion. It then lent a further CNY3.3 billion on April 30 and CNY1.6 billion on May 14.

To help repay debt falling due this year, Vanke has now borrowed CNY14.9 billion (USD2.1 billion) from Shenzhen Metro.

The terms are as generous this time as they were for the previous four loans. As with the last two, Vanke may prepay at any time, extend the repayment period with the lender's consent, and pay the interest together with the principal at maturity. But unlike them, the latest loan requires collateral. The first two loans required Vanke to pay interest quarterly and provide assets as surety.

Vanke has very few assets left that it can use as collateral, but Shenzhen Metro cannot ignore the developer's tight cash flow and has to meet its funding needs through low-interest loans, industry insiders pointed out.

Vanke is under considerable debt repayment pressure this year. According to a report by China Chengxin International Credit Rating, as of May 31 the firm had nearly CNY21.8 billion (USD3 billion) of onshore and offshore debts maturing this year.

This month and next, Vanke has four bonds coming due, amounting to CNY7.6 billion, per data from Wind Information. The pressure will peak in July, when CNY5.9 billion falls due.

The yield on Vanke's corporate bonds in the secondary market remains relatively high, making it difficult for the company to secure funding by selling new bonds, Chengxin International Credit Rating said in the report. Moreover, the market for new homes has not yet recovered, and Vanke has relatively few new projects ready for launch, it said.

As a result, Vanke is expected to go on relying on financing from banks and major shareholders to sustain its daily operations and repay maturing debts, the report noted.  

Editors: Tang Shihua, Futura Costaglione