We need to study the mechanisms for business bankruptcy.

"Bond Zombies": A mechanism for corporate bankruptcy needs to be studied.

In reality, some businesses today exist like zombies, unable to repay their bonds. According to Dr. Le Xuan Nghia, an economic expert, the most feasible solution for these cases is to allow bankruptcy.

According to VIS Ratings' estimates, approximately 27% of maturing bonds are at risk of default within the next 12 months (including 65% of bonds that have already defaulted). Meanwhile, the pressure to meet corporate bond maturities in the 2024-2025 period remains very high.

Given this situation, there are concerns about the possibility of bond defaults, especially for real estate bonds. However, Dr. Can Van Luc, an economic expert, believes that real estate businesses have overcome the most difficult period (June - August 2023) thanks to Decree 08/2023/ND-CP which allows for negotiations on debt deferral and postponement.

Essentially, 60% of real estate businesses have extended their bond repayment periods by two years (reaching a peak in June 2025). Businesses are proactively repurchasing bonds according to the issuance conditions and have begun reissuing them to reduce capital pressure. Furthermore, with the warming real estate market, businesses are willing to sell assets to allocate a portion of their proceeds to repay debt.

"The likelihood of default is low because the worst is over, and there are many synchronized solutions to address the issue. In reality, real estate businesses don't need to offer 40-50% discounts like before; a 10% discount is enough to sell," commented Dr. Can Van Luc.

Regarding this issue, Mr. Nguyen Quang Thuan, General Director of FiinRatings, believes that overdue debt is the biggest problem for the corporate bond market in the 2024-2025 period.

"Support should not only focus on rescuing bonds, but most importantly, on resolving legal issues related to real estate. Once this issue is resolved, handling overdue debts will be much easier," Mr. Thuan suggested.

However, in reality, some businesses currently exist like zombies, unable to repay their bonds. According to Dr. Le Xuan Nghia, an economic expert, the most feasible solution for these cases is to allow bankruptcy.

"Regarding the issue of handling cases of non-payment of principal/interest on bonds, which erodes investor confidence, I believe the most fundamental solution is bankruptcy. Any company that cannot repay its debts, whose situation is too dire, should be allowed to go bankrupt, and investors need to learn to accept the risks and losses," Dr. Le Xuan Nghia proposed.

However, Dr. Can Van Luc argues that in Vietnam, it is already difficult for a normal business to go bankrupt, and even more difficult for a business with outstanding bond debt to go bankrupt.

According to the Bond Market Association, the most crucial element for the development of the bond market is transparency. There are many measures and tools to maintain transparency, including internal measures within businesses, audits and inspections by regulatory agencies, and mandatory reporting requirements. Credit ratings also contribute to increased transparency, leading to a healthier and more substantive market development.

Regarding bankruptcy issues, Mr. Do Ngoc Quynh, Secretary General of the Vietnam Bond Market Association, believes that perfecting and enhancing the effectiveness of the Bankruptcy Law is crucial. All development is based on the law of elimination; otherwise, it will be like "a body that cannot digest food will develop many illnesses."

“Decree 08 allows for negotiations on extensions, but individual investors lack the capacity to assess the value of issued bonds. Therefore, when businesses request extensions, individual investors panic. Many are forced to accept negotiations for extensions. On the other hand, there is currently no answer to the question, 'If they don't accept, how can they sue the business?' It's important to recognize that if extensions are granted to businesses that cannot recover, the situation could worsen,” Mr. Quynh stated frankly.

Source: https://baodautu.vn/zombie-trai-phieu-can-nghien-cuu-co-che-cho-doanh-nghiep-pha-san-d222566.html