Bond maturity still puts great pressure on real estate businesses

The ability of real estate businesses to repay bonds is still very weak. Photo: Hai Nguyen

According to VIS Rating's corporate bond market report, as of the end of April 2024, the rate of overdue bonds in the entire market was 15%, unchanged from March 2024. More than half of the bonds with overdue principal or interest payments came from the residential real estate sector, with the rate of overdue principal or interest payments in this sector being 30%.

For example, Khai Hoan Land Group recently extended the bond term by 1 year after extending the term by 1 year in 2023. Accordingly, Khai Hoan Land has just approved extending the term of bond code KHGH2123001 to April 5, 2025, adjusting the interest rate to 12%/year.

It is known that as of December 31, 2023, Khai Hoan Land has a total short-term and long-term debt of VND 1,005 billion, accounting for 15.7% of total capital. Of which, short-term debt is VND 765 billion and long-term debt is VND 240 billion. Khai Hoan Land explained that as of December 31, 2023, the company has outstanding 3 bonds including bond code KHGH2123001 with a face value of VND 300 billion, bond code KHGH2123002 with a face value of VND 300 billion, and bond code KHGH2328001 with a face value of VND 240 billion.

Or, for example, Unity Real Estate Investment Company Limited has just announced its periodic financial situation according to regulations on offering and trading individual corporate bonds. Accordingly, as of December 31, 2023, the equity of Unity Real Estate Investment Company Limited reached VND 2,916.1 billion, a slight decrease compared to VND 3,089.6 billion in 2022.

The debt/equity ratio will decrease slightly from 1.4 times in 2022 to 1.37 times in 2023, corresponding to liabilities reaching more than VND 3,995 billion.

Bond debt to equity increased from 0.32 times in 2022 to 0.38 times in 2023, equivalent to VND 1,108.1 billion in bond debt. Unity Real Estate Investment Company Limited extended its losing streak when in 2023 it recorded a negative after-tax profit of VND 173.5 billion. In 2022, the company's after-tax loss was VND 124.2 billion.

In May 2024, according to VIS Rating data, 28 bond codes belonging to 24 issuers worth VND 15,000 billion will mature. Of which, VIS Rating estimates about VND 4,700 billion, equivalent to 30%, are at risk of late payment of debt due in May 2024.

Of the VND4,700 billion worth of high-risk bonds, about VND4,000 billion issued by three companies have delayed coupon payments in 2023. VIS Rating assessed that these issuers are highly likely to delay principal payments due to weak cash flow and depleted cash resources. The remaining VND700 billion of bonds with high risk of first-time late payments are mostly issued by issuers in the residential real estate sector.

“We note that these issuers have average EBITDA margins of less than 10% or even negative over the past three years and their cash resources to repay maturing debt are depleted,” VIS Rating’s report emphasized. In addition, in the next 12 months, about 19% of outstanding bonds with a total value of VND221,000 billion will mature. An estimated 10% of these are at high risk of first payment delay, mainly concentrated in the residential real estate sector.

Source: https://laodong.vn/tien-te-dau-tu/dao-han-trai-phieu-van-gay-ap-luc-lon-cho-doanh-nghiep-bat-dong-san-1342890.ldo