Real estate businesses need to seriously consider selling assets to have cash flow.

Bond maturity pressure still surrounds

According to data from the Vietnam Bond Market Association (VBMA), the total value of corporate bond issuance in the first 10 months was recorded at VND209,150 billion. This shows that capital mobilization activities from the bond channel have improved compared to 2022.

Of which, the banking sector dominates with VND99,023 billion (accounting for 47.3% of the total value). Next is the real estate group with VND68,256 billion (accounting for 32.6%).

However, research by the Vietnam Association of Realtors (VARS) shows that the pressure of bond maturity is still "surrounding" real estate businesses. The total value of newly issued and repurchased real estate 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 10 months, 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 15,600 billion VND and 121,100 billion 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, as of October 3, there were about 69 enterprises on the list of enterprises that are late in paying interest or principal on corporate bonds with a total outstanding debt of about VND176,100 billion, accounting for about 17.8% of outstanding corporate bond debt in the whole market.

Faced with the pressure of bond maturity, in order to have time to restructure cash flow and improve debt repayment capacity, VARS believes that negotiating to extend the time is the first choice of real estate businesses in the context of difficulty in accessing credit capital and the market has not fully recovered. Negotiations for extension have been active with quite successful results since April.

According to the Hanoi Stock Exchange, 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 2 years, pushing back debt repayment pressure to the 2025-2026 period.

VARS assesses that bond extension negotiations 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 and business and restructure corporate debt to recover. Basically, it is just transferring debt from one time to another.

Doanh nghiệp BĐS cần nghiêm túc cân nhắc bán bớt tài sản để có dòng tiền - 1 — The pressure of bond maturity is still "surrounding" real estate businesses (Source: VARS).

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.

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).

To develop the corporate bond market

In the long term, corporate bonds are still an effective capital mobilization channel, demonstrating the dynamism of an economy , in line with the trend of asset allocation into bonds of investors. Compared to countries in the region such as Malaysia, Singapore, Thailand, the scale of the Vietnamese corporate bond market is still very modest.

To create more room for the corporate bond market, businesses need to increase customer confidence. This is also the most important link for businesses to restructure debt.

In fact, in recent times, the efforts of State management agencies in rectifying and stabilizing the operations of the corporate bond market, ensuring the market operates safely, effectively, healthily and transparently have had positive results.

Capital mobilization through bonds has been and continues to improve in both quality and quantity, especially since the private corporate bond trading system was officially launched on the Hanoi Stock Exchange on July 19, contributing to restoring investors' confidence in a more transparent and efficient market.

However, there is still a huge information gap between the market and investors. Vietnam has only a few organizations that assess the credit rating of bond-issuing enterprises. Meanwhile, not all corporate bond investors have the ability and time to assess the financial situation of enterprises and bond risks when deciding to invest.

To attract individual investors to participate in the corporate bond market and create more room for the market, VARS believes that State management agencies need to continue to improve the policy framework related to credit rating regulations for corporate bonds issued to the public in order to create risk prevention tools for investors.

In addition, the authorities, especially the Ministry of Finance and the State Securities Commission, need to set up an effective inspection mechanism for bond-issuing enterprises right from the stage of submitting documents, instead of detecting violations and canceling successful issuance deals, causing unnecessary turmoil in the market.

Source