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Monday, October 2, 2023

Over VND72 trillion of real estate bonds about to fall due

The Saigon Times

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HCMC – A staggering VND147.3 trillion worth of corporate bonds will fall due in the second half of the year, with nearly half (over VND72 trillion) owed by real estate firms.

Following a strong surge in new corporate bond issues in March, the market has returned to its lackluster state.

Data from the Hanoi Stock Exchange (HNX) showed that corporate bond issues had amounted to VND68.5 trillion in the year up to July 14, with 11 public offerings worth nearly VND9.3 trillion and 54 private placements totaling VND59.2 trillion.

As of mid-July, overdue coupons and principals of corporate bonds had reached VND44 trillion, and VND18 trillion worth of bonds had been swapped with other assets, extended, and had terms and conditions changed.

The current real estate market stagnation and financial constraints experienced by numerous companies have resulted in a growing number of firms facing difficulties in meeting their bond obligations, said Nguyen Ba Khuong, an analyst at VNDIRECT Securities Corporation.

In the first half of July alone, four issuing organizations publicly announced delays in principal and interest payments, totaling over VND4.4 trillion. Of the four organizations publicly unveiling plans to restructure their bonds, three extended bond terms and deferred interest payments, while the other opted to swap bonds for assets.

By June 26, there were 59 bond-issuing firms included in the HNX’s list of companies that delayed coupon or principal payments for their corporate bonds.

VNDIRECT estimated that the total value of bonds issued by these companies stood at around VND159.5 trillion, accounting for 14.6% of the entire corporate bond market size. Of this, more than VND43.8 trillion worth of corporate bonds from these companies are set to fall due in 2023, comprising 19.6% of the total market maturity value for the entire year.

According to Khuong, the pressure on maturing corporate bonds intensifies in the latter half of the year, and many issuing organizations have had difficulties with their business operations and cash flows. The tough economic conditions and financial constraints have made it hard for these companies to fulfill their bond obligations, leading to increased efforts to negotiate bond term extensions to manage their financial situation.

VNDIRECT forecasted a 45.6% surge in the value of maturing corporate bonds this year, reaching VND223.4 trillion, with the third quarter alone accounting for over VND75.9 trillion of these maturities, a 14.9% increase over the second quarter.

The real estate sector holds the largest share, nearly 43.6% of the total value of bonds that fall due in the third quarter, followed by the financial and banking sector at 30% of the total maturity value.

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