HCMC – Non-performing corporate bonds are looming large due to a high financial leverage ratio and negative cash flow of unlisted, cash-strapped real estate companies.
A recent market report by the Vietnam Investors Service and Credit Rating Agency JSC (VIS Rating) indicated gloomy prospects for the recovery of corporate bonds, reflected in a bad debt ratio jumping to 10% in March 2023 from 1.2% last September.
The report pointed out that nearly 95% of bond payment failures were associated with real estate firms, most of which were unlisted companies that have a high financial leverage ratio and financial troubles, leading to the bad debt ratio of the real estate sector soaring to 17% by the end of March.
VIS Rating estimated that non-performing bonds of real estate companies totaled VND41 trillion, with 88 issuers facing insolvency.
Meanwhile, corporate bonds worth around VND113 trillion expected to fall due from the second quarter to the end of the year may turn sour, especially those issued by cash-strapped real estate firms.
Amid unfavorable market conditions and weak investor sentiment, it would be difficult for those firms to take out loans to refinance, making insolvency risk loom larger, according to VIS Rating.