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Thursday, July 25, 2024

Over 80% of real estate bonds have low creditworthiness: FiinRatings

The Saigon Times

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HCMC – Over 80% of real estate bonds have been issued by unlisted firms that are financially weak and have low transparency, said the credit rating agency FiinRatings.

They may financially leverage further in 2023, causing default risk to grow at alarming rates, FiinRatings said in its latest report.

With their cash flows plunging, these businesses are facing insolvency, as housing is a capital-intensive industry. Meanwhile, real estate firms must supply enough money for projects that usually require three to five years to complete.

Bonds worth over VND230.8 trillion issued by real estate companies will fall due in the next two years, accounting for over a third of the value of mature bonds in the market.

Most of the bonds have tenures of less than 3.5 years, demonstrating the sector’s high demand for borrowing to restructure debt.

Due to a capital shortage and revenue plunge, real estate firms may resort to refinancing, buying back bonds before maturity, or paying debt by real estate products, according to the report.

Data from the Ministry of Construction showed that outstanding loans in the real estate sector had topped VND1,200 trillion as of late December 2022, with VND800 trillion owed to banks and over VND400 trillion being real estate bonds.

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