HCMC – The Government Inspectorate has released a report on its conclusions on compliance with laws and regulations governing the issuance of corporate bonds via private placement and the use of proceeds from bond sales during the period from January 1, 2015, to June 30, 2023, local news reports said today. In particular, the inspectorate has sent two cases to the Ministry of Public Security for investigation.
The report states that the inspectorate has transferred two cases involving violations in corporate bond issues at No Va Real Estate Investment Group Corporation (Novaland Group; HOSE: NVL) and three of its subsidiaries, along with four related companies, to the Ministry of Public Security for investigation and handling.
At Novaland Group, inspectors found that the company had issued VND1.5 trillion worth of corporate bonds to increase capital for its subsidiary, Khai Hung Real Estate Co., Ltd.
Khai Hung later used this money to acquire a 99.9% stake worth VND1.843 trillion in The Ky Hoang Kim Real Estate Co., Ltd., owned by Vo Thi Kim Khoa.
However, upon reviewing cash flows across several banks, inspectors discovered that Khoa’s capital at The Ky Hoang Kim Real Estate Co., Ltd. did not actually exist, as most of the funds had been transferred out on the same day as she received them.
Moreover, after Novaland Group transferred VND1.5 trillion in bond proceeds to Khai Hung, the money was moved “through multiple intermediary companies” before ultimately ending up with Nova Homes Trading Joint Stock Company for use.
Government inspectors concluded that Novaland Group and three of its member companies—Unity, Aqua, and Lucky House—had violated regulations in issuing corporate bonds. After receiving the proceeds from bond issues, individuals transferred about VND7.084 trillion to Nova Homes Trading Joint Stock Company for use.
Although inspectors could not verify every intermediary transaction, they said that Novaland Group and its three subsidiaries had used similar methods to utilize bond proceeds. These entities appeared to have coordinated with individuals and legal entities to make contributions to charter capital and used bond proceeds to acquire stakes and funnel money to Nova Homes Trading Joint Stock Company for use.
Inspectors identified 20 bond issuing entities belonging to those companies related to Novaland Group. During the review period, inspectors found these 20 issuers launched 45 corporate bond codes via private placement, with a total value of VND27.35 trillion. As of June 30, 2023, 23 bond codes remained outstanding with a total value of nearly VND16.9 trillion. Among these, four issuers had overdue principal and interest payments, while two others had overdue interest, with total debt of VND4.555 trillion.
The inspection conclusion report said that four companies related to Novaland Group —GreenWich, BNP Global, Cat Lien Hoa Real Estate Development Co., Ltd, and Residence Investment and Development JSC — committed violations.
GreenWich issued bonds and used VND2 trillion in bond proceeds to partner with An Khang Real Estate Development. By the end of June 2023, the bonds fell overdue with more than VND1.57 trillion in principal and more than VND241 billion in interest, with GreenWich yet to repay bondholders. At the time of inspection, there was a possibility that the company could not repay principal and interest.
BNP Global issued VND2.1 trillion in bonds and used the proceeds to partially pay for a business cooperation contract at the Mui Yen project. By June 2023, it had overdue bond principal of more than VND2 trillion and overdue interest of VND64 billion. The company conducted negotiations over debt payment extensions with bondholders but failed.
By April 12, 2024, BNP Global had repaid all overdue interest and VND833 billion of the principal, leaving VND1.216 trillion in outstanding principal still overdue.
Government inspectors concluded that the company had failed to honor its obligation to make full and timely payments of bond principal and interest.
Cat Lien Hoa Real Estate Development issued VND986 billion in bonds but delayed payments of both interest and principal.
Residence Investment and Development issued VND3 trillion in corporate bonds to make advance payments to Nova Homes Trading Joint Stock Company for purchasing resort villas at the NovaWorld Phan Thiet project. However, the inspectorate noted that this was merely a “deposit agreement” that effectively allowed Nova Homes Trading Joint Stock Company to use the bond funds for an extended period.
