(Yicai) Dec. 2 -- Debt-ridden real estate developer China Vanke has formulated a plan to extend the repayment of a CNY2 billion (USD280 million) onshore bond coming due in the middle of this month by one year, according to a source.

Vanke is seeking to delay the repayment of principal and interest accrued before the extension of the bond by 12 months, without compound interest during the period, an informed source told Yicai. The coupon rate will remain unchanged at 3 percent during the extension period, and the newly accrued interest will be paid with the principal on the new maturity date.

Vanke said on Nov. 26 that it will hold a bondholders' meeting on Dec. 10 to consider extending the CNY2 billion onshore bond, 22 Vanke MTN004, which will fall due on Dec. 15. The voting deadline is midnight on Dec. 12.

Since the announcement, Vanke's shares [SHE: 000002; HKG: 2202] have fallen sharply because of the risk of a debt default in case the extension proposal is rejected. They declined 11 percent to CNY5.23 (73 US cents) and 7.2 percent to HKD3.60 (46 US cents), respectively, as of 10.40 a.m. today from Nov. 26. The company's bond prices have dropped much more sharply during the period.

Onshore bond extension plans previously proposed by other large real estate developers facing repayment difficulties usually adopted phased repayment methods, and rarely extended both principal and interest directly by one year.

Vanke had initially discussed a phased repayment plan with bondholders, but the final decision is to extend the entire principal and interest for one year, the source explained.

Vanke had repaid onshore and offshore bonds worth CNY28.9 billion (USD4.1 billion) this year as of Sept. 30, with another medium-term note with an outstanding balance of CNY3.7 billion maturing at the end of December, while the company still has about CNY12.4 billion in on shore bonds maturing in 2026, as well as CNY7 billion worth of offshore bonds and over CNY3 billion in onshore bonds maturing in 2027

Plagued by tight liquidity, Vanke has relied on loans from its controlling shareholder Shenzhen Metro Group to fund the repayment of maturing bonds' principal and interests. Shenzhen Metro has provided Vanke with unsecured loans worth nearly CNY30.8 billion so far this year.

Since the shareholder loan has reached to the up-limit Shenzhen Metro Group promised early this year, Vanke is required to provide collateral for these loans. Otherwise, Shenzhen Metro reserves the right to demand early repayment of the principal and interest, according to an announcement the company issued last week.

Despite Shenzhen Metro's efforts, there are no signs of improvement in Vanke's financial performance. Net loss widened 56 percent to CNY28 billion in the first three quarters of the year from a year earlier, with third-quarter net loss nearly doubling to CNY16.1 billion, according to the company's latest financial report.

Vanke's operating revenue fell 27 percent to CNY161.4 billion (USD22.6 billion) in the nine months ended Sept. 30 from a year earlier, the lowest since 2018. Third-quarter operating revenue also dropped 27 percent to CNY56.1 billion from the same period last year.

Editors: Tang Shihua, Futura Costaglione