According to data from the Vietnam Bond Market Association (VBMA) compiled from the Hanoi Stock Exchange (HNX) and the State Securities Commission (SSC), there were only 3 bond issuances by companies (DNs) in February 2024. The pressure of bond maturity remains high until the end of the year, especially for real estate DNs.
Still DNs Slow to Repay
The demand for DN bond investments is improving in the context of investors regaining confidence and the low deposit interest rates. On bond trading forums, many investors are interested in bonds issued by DNs with interest rates of around 7%-10% per year, significantly higher than deposit interest rates.
Some DNs have successfully issued bonds to raise capital for production and business operations, project implementation, etc. HNX has recently announced the notice of CP Hung Thinh Phat General Joint Stock Company completing the issuance of a batch of bonds worth 2,888 billion VND, with a maturity of 4 years. This company operates primarily in the real estate sector and is headquartered in Ho Chi Minh City.
Bond buyback activity is also vibrant. Dat Phuong Joint Stock Company (DPG) announced the registration to buy back 2,000 bonds with a total value of 200 billion VND. Dat Phuong will also complete the repurchase of 100% of the value of 3,000 bonds (300 billion VND) issued in 2021. This company operates primarily in the basic construction, engineering, and real estate sectors.
Kinh Bac Urban Development Corporation (KBC) has settled 1 lot of bonds due and repurchased 2 lots of bonds due as planned. Many other DNs have also repurchased bonds due before maturity worth thousands of billion VND, such as Phat Dat Real Estate Investment Joint Stock Company, Namy Namy Investment Joint Stock Company, etc.
The pressure on cash flows and the issue of bond maturity will be a challenge for real estate DNs. In the photo: The site of a real estate project waiting for implementation. Photo by BINHAN
Meanwhile, slow payment of bond interest still occurs. No Va Real Estate Investment Group Joint Stock Company (Novaland – NVL) has just announced to HNX regarding the bond interest payment situation. NVL requested to delay the payment of interest on 4 lots of bonds until the end of February 2024 with the same reason “not yet arranged in time for payment”. The total expected interest to be paid for these 4 lots is nearly 98 billion VND.
The VBMA’s data shows that in February 2024, 7 DNs announced late payment of principal and interest in the month, with a total value of about 6,213 billion VND (including interest and remaining debt of bonds); 24 bond codes had their interest repayment period, principal or bond repurchase time extended before maturity.
The bond capital mobilization picture of DNs in the bond market is not too bright when in February, there were only 3 separate bond issuances worth 1,165 billion VND, continuing the bleak issuance situation since the beginning of the year. The value of issuances in February 2024 is at a very low level compared to the market in 2023, when some provisions in Decree 65/2022/ND-CP took effect again and tightened the regulations on bond issuance. In which, a typical criterion is the determination of professional individuals and credit rating requirements.
Continued Recommendations for Troubleshooting
In February 2024, DNs bought back bonds worth 2,056 billion VND before maturity. In the remaining 10 months of this year, an estimated 255,732 billion VND of bonds are due, mostly real estate bonds accounting for over 98,000 billion VND.
Difficulties for real estate DNs still abound when it comes to bond repayment. According to Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), the amount of bonds due this year is still very high.
Despite the economic recovery, real estate has bottomed out, but bonds are still a burden for DNs. Because in 2023, the value of bond issuances decreased by 40% compared to the previous year, and most successful capital mobilization channels used by DNs through this channel are limited liability companies, not public companies.
In the FiinRatings’ Vietnam debt capital market outlook report for 2024, experts estimate that by the end of 2023, the value of late principal/interest repayments (including restructured and extended bonds) of 131 issuers will reach 192,800 billion VND, accounting for 16% of the total bond market of DNs in circulation. Energy DNs account for the highest proportion of late repayments by sector (47.9%), followed by real estate, trade, and services…
FiinRatings experts commented: “In addition to the pressure of bond maturity, compared to 2023, the market will face additional burdens from delayed payments of principal/interest on bonds extended before that through Decree 08/2023/ND-CP, estimated to have a value of 94,100 billion VND. Late payment ratios will continue to increase, but the expected value of principal and interest payments this year will be lower than last year”.
Regarding real estate bonds, many experts believe that the pressure cannot be alleviated significantly. Nguyen Ba Khuong, an expert from the Analysis Department of VNDIRECT Securities Company, commented that the real estate market is still sluggish, and resolving legal issues for ongoing projects is slow, making business operations difficult for the remaining DNs. The pressure on cash flows and bond maturity will continue to be a significant challenge for real estate DNs.
Previously, the Government issued Decree 08 to postpone the application of some provisions of Decree 65/2022/ND-CP, helping to relieve bond payment pressure for DNs. However, these regulations only remain effective until the end of December 31, 2023. At the same time, many provisions regarding professional securities investors and credit rating requirements in Decree 65 have become effective, creating pressure to attract new investors to participate in the market.
In contrast, the new regulations will establish stricter discipline for all related parties, supporting the recovery of market confidence. The large demand for bond issuance by the banking group to supplement capital and meet financial safety indicators will lead the bond market this year. Investors will also benefit from these conditions because of the transparency and improved quality of newly issued bonds.
Le Hoang Chau emphasized: “HoREA proposes that the Ministry of Finance and the Prime Minister consider approving an extension of the application of Article 3 of Decree 08 for an additional 12 months, until the end of 2024, to continue to resolve difficulties, helping real estate DNs have more time to restructure their debts to accelerate the recovery process. The State Bank of Vietnam is requested to consider amending the regulations to allow credit institutions to buy back DN bonds in order to restructure their own debts”.
DN bond scale still modest
According to FiinRatings, DN bonds are in a new developmental stage with a relatively modest market size, accounting for only 9.75% of the national GDP. In the future, this market will be supported by low-interest rate levels, especially for DNs facing liquidity pressures, ensuring cash flows for debt payment obligations.
