According to the report of the Vietnam Association of Realtors (VARs), in the period of 2017 - 2021, the corporate bond market (TPDN) has grown strongly, achieving positive results in both scale and liquidity, becoming an important medium and long-term capital mobilization channel for businesses. In 2021 alone, the value of corporate bond issuance exploded, reaching more than 700 trillion VND, equivalent to 16.7% of GDP, accounting for nearly 12% of outstanding credit in the country in 2021.
Illustration photo. (Source: PO)
After a period of rapid growth, by mid-2022, a number of serious violations that caused investors to lose confidence forced the corporate bond market to undergo a new turning point, with many controls and warnings from authorities. The total value of corporate bond issuance in 2022 decreased sharply by 64.4% compared to 2021, estimated at VND 269,733 billion.
The corporate bond market has been in a prolonged state of dismal performance with issuance value continuously falling and has only seen improvement since early March this year when Decree No. 08/ND-CP was issued along with the synchronous implementation of market stabilization solutions.
According to data from the Vietnam Bond Market Association (VBMA), by the end of October 2023, the total value of corporate bond issuance recorded VND 209,150 billion, showing that capital mobilization activities from the bond channel have improved significantly compared to last year.
Of which, the Banking sector dominates with VND 99,023 billion (47.3% of the total), followed by the Real Estate group with VND 68,256 billion (32.6%).
However, VARs research shows that the pressure of bond maturity is still "surrounding" real estate businesses. The total value of newly issued and repurchased real estate corporate bonds is still very low compared to the total value of maturing corporate bonds.
Accordingly, in 2022, real estate enterprises bought back about 219,000 billion VND. In the first 10 months of this year, enterprises bought back about 153,800 billion VND. Meanwhile, the total value of bonds maturing in the real estate group in the last 2 months of 2023 and 2024 reached 15.6 trillion VND and 121.1 trillion VND, respectively.
The list of enterprises that are late in paying their bond debt obligations is increasing day by day, especially in the real estate group. According to the Hanoi Stock Exchange (HNX), as of October 3, 2023, there were about 69 enterprises on the list of enterprises that were late in paying interest or principal on corporate bonds with a total outstanding debt of about VND 176,100 billion, accounting for about 17.8% of outstanding corporate bonds in the whole market.
According to VARs, under pressure from bond maturity, in order to have time to restructure cash flow and improve debt repayment ability, negotiating to extend the time is the first choice of real estate businesses in the context of difficulty in accessing credit capital and the real estate market has not fully recovered. Negotiations for extension have been active with quite successful results since April 2023.
According to HNX, as of October 3, more than 50 issuers had reached agreements to extend bond terms with a total value of more than VND95,200 billion. The maturity date was mainly adjusted by two years, pushing back debt repayment pressure to the 2025-2026 period.
Negotiating bond extensions will continue to be a trend in the coming time. However, difficulties still lie ahead, extending the debt repayment period only helps businesses have time to stabilize production, business and restructure corporate debt to recover. Basically, it is just transferring debt from one time to another.
VARs emphasize: In order to avoid the risk of bankruptcy, businesses need to take advantage of this time to restructure their debts. They must seriously consider selling off assets, even accepting break-even or losses to have cash flow to pay off debts and complete projects that can be liquidated immediately upon being launched on the market.
“This is also a “silence” that gives investors time to pause, reflect, and examine conditions, thereby orienting their participation in a more sustainable and effective manner,” the VARs report stated.
In addition, in addition to familiar financial sources (bank credit and corporate bonds), there should be mechanisms and policies to develop, attract and ensure effective operation of capital sources from other financial products (real estate investment funds - REIT, Housing Savings Fund, real estate securitization...), or other channels (direct and indirect foreign investment).
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