Real estate businesses rush to restructure bond debt

In the first week of July 2024 alone, 9 businesses announced late payments of principal, interest or extended bond repayment terms, mainly real estate businesses. In the second half of 2024, real estate businesses are facing pressure to repay nearly VND59,000 billion in bonds.

Due to the sluggish market, slow payment or debt extension are mainly for real estate businesses. Photo : Duc Thanh

Many real estate businesses are slow to pay debts, asking for bond extensions

From the beginning of the year to the date of information announcement (July 5), the market recorded 133 private issuances and 10 public issuances, with a total issuance value of more than VND140,000 billion, of which 65.6% of the issuance value belonged to the banking sector. Real estate bonds accounted for only 24.6% of the total, equivalent to more than VND34,500 billion.

In June 2024, bond issuance activities of real estate enterprises began to become active again. Typical are the issuance of VND 2,500 billion by Vinhomes, VND 1,000 billion bySun Group , VND 800 billion by Becamex, VND 600 billion by Thien Ha - Bang Duong Construction Investment Company Limited, VND 550 billion by Nam Long Real Estate. In addition, there were a number of issuances by An Hoa Construction Inspection Joint Stock Company, Trung Minh New Urban Area Company Limited, and Khai Hoan Land Group Joint Stock Company.

In terms of absolute value, real estate bond issuance has recovered compared to the same period last year, but the proportion has decreased sharply. Specifically, in the first 6 months of 2023, real estate bonds accounted for nearly 55% of the issuance value, but in the first 6 months of this year, they only accounted for nearly 25% of the issuance value.

It is worth noting that real estate businesses are facing a huge maturity burden and the rate of late payment in this sector continues to increase rapidly.

In the first week of July 2024 alone, 9 enterprises announced late payment of principal and interest on bonds and changes in bond terms and conditions (mainly extending bond terms by 12-24 months). Enterprises that are late in payment or have to extend bond debt are mainly in the real estate sector, typically No Va Real Estate, Gia Duc Real Estate, Vinh Xuan Real Estate, Ngoc Minh Real Estate.

Previously, in June 2024, many real estate businesses also announced late payment or requested to extend bond debt, typically Cat Lien Hoa Real Estate, Vinh Xuan Real Estate, No Va Real Estate, Big Gain Investment, AQUA City, Hoang Cat Real Estate, Binh Duong Investment and Trading Joint Stock Company...

In the second half of 2024, it is estimated that about VND140,000 billion of bonds will mature, of which the majority are real estate bonds (nearly VND59,000 billion), equivalent to 42%. This is also the group of bonds facing the greatest debt repayment pressure at present.

According to FiinGroup statistics, as of May 2024, the rate of late payment of bonds (including restructured and deferred corporate bonds) is nearly 18%; for non-bank corporate bonds alone, the rate of late payment is nearly 26%. The value of problematic corporate bonds is about VND 215,000 billion as of the end of May 2024.

Real estate is the industry with the largest volume of overdue bonds, with a late payment rate of up to 42.5%. Fortunately, in the first 5 months of 2024, although the rate of problematic corporate bonds remained high, it has slowed down compared to 2023.

In the second half of 2024, it is estimated that about VND140,000 billion worth of bonds will mature, most of which are real estate bonds. Photo: Duc Thanh. Graphics: Dan Nguyen

Real estate businesses accept high-interest loans through bond channels

In the first half of this year, real estate businesses performed well, mobilizing bonds with an average yield of 9-12%/year, mainly from large investors with great brands and reputations, such as Vinhomes, Nam Long, Khang Dien...

Real estate bond yields of high-risk groups with financial difficulties can reach 20-30%, even up to 50%, mainly occurring with low liquidity bonds.

Since the beginning of the year, the market has recorded 133 private placements and 10 public placements, with a total issuance value of over VND140,000 billion, of which 65.6% of the issuance value is in the banking sector. Real estate bonds account for 24.6% of the total, equivalent to over VND34,500 billion.

“From the second half of 2023 until now, many real estate businesses have encountered liquidity difficulties. Therefore, there have been corporate bonds traded with yields of up to 20-25%. These are usually businesses that are having difficulty implementing projects. Meanwhile, their financial pressure is relatively large in the next 12-18 months and the ability to refinance or raise new capital is facing many challenges. This also partly reflects the appropriate risk appetite of investors who have bought in,” said FiinGroup analyst.

From another perspective, accepting high-interest bond mobilization also shows that accessing bank credit for businesses is not easy, especially for businesses that no longer have collateral and find it difficult to prove their ability to repay debt.

However, Mr. Nguyen Dinh Duy, Director and senior analyst at Vietnam Investment Credit Rating Joint Stock Company, said that access to capital (including bank credit and bond mobilization) for real estate businesses will be easier in the second half of the year.

Specifically, three new laws related to real estate, effective from August 1, 2024, will help investors solve problems related to land valuation and land use rights, thereby accessing financial resources for new project development. Bond capital mobilization recovers, real estate business credit is estimated to increase by 16-18% in 2024. In addition, many listed real estate enterprises have announced plans to increase equity capital this year (it is expected that about VND 26,000 billion of new equity capital will be mobilized for project development or to repay maturing debts).

All of these factors, according to Mr. Duy, will help investors reduce liquidity difficulties due to large debt maturing pressure in 2024 and 2025.

Source: https://baodautu.vn/doanh-nghiep-bat-dong-san-don-dap-co-cau-no-trai-phieu-d219966.html