Businesses 'relieved of pressure from maturing bonds', still worried about negotiating with bondholders

Help businesses with bond debt avoid "deadlock"

Speaking with PV.VietNamNet, Dr. Nguyen Van Dinh, Vice President of the Vietnam Real Estate Association, assessed that the new regulations in Decree 08, such as allowing bond-issuing enterprises to negotiate with bondholders to pay the principal and interest of the bond due with other assets or to extend the bond term to a maximum of 2 years, are intended to help enterprises at this time. This opens up more options for enterprises to handle the bond issue, but requires negotiation between the two parties, the enterprise and the bondholder.

“Some open regulations on bonds will also help real estate businesses with bond debt not to be in a “deadlock” situation, opening up hope for them, suitable solutions to restructure products, creating opportunities for development, benefiting the market, investors and the economy in general,” said Mr. Dinh.

Experts and businesses believe that Decree 08 on bonds helps businesses with bond debt avoid being "deadlocked"... (Photo: Hoang Ha)

From a business perspective, speaking with PV.VietNamnet, Mr. Vu Cuong Quyet, General Director of Dat Xanh North, assessed that Decree 08 provides solutions that businesses really need in the current context, although a bit late.

“When the bonds mature, businesses have no cash flow; it will be very difficult to raise a large amount of money to pay for the bonds. If they cannot pay, it will cause many consequences and conflicts with capital raising organizations and bondholders, creating great turmoil. Businesses are in dire need of negotiating with bondholders to extend debt or swap assets. The new regulations will help the parties work together better,” said Mr. Quyet.

To limit risks, Decree 08 also provides principles for implementing this asset swap plan. Accordingly, receiving other assets or extending the bond term to a maximum of 2 years must be "approved by the bondholder".

Mr. Quyet said that this regulation will not be too difficult for businesses to implement, because this is an economic relationship that needs to harmonize the interests of both businesses and bondholders.

“The new regulations on bonds will support real estate businesses to stand firm for a while longer, waiting for the market to improve and for better buying psychology. Bondholders do not have to worry too much about cash flow, there is a solution to exchange products or extend the time if they do not need the money yet.

The market has more time to absorb, interest rates are gradually decreasing, when interest rates decrease, it stimulates consumption. The market gradually becomes more stable instead of the market not knowing when to stop. The market psychology is more stable, the real estate market will also be better in the future", Mr. Quyet commented.

The problem lies in the negotiation results between bondholders and enterprises.

Also assessing that some new regulations on bonds will impact the psychology of being 'loosened' and 'more comfortable', Mr. Pham Duc Toan, General Director of Real Estate Investment and Development Joint Stock Company (EZ Property) said that the immediate psychology will have a positive impact on the financial market and partly on the operations of some businesses.

"Enterprises will feel less suffocated, less pressured financially, and less pressure to pay off maturing bonds. The new regulations help create time and a legal corridor for enterprises to manage and negotiate with bondholders instead of declaring bankruptcy. But in the long term, units still need to have specific strategies to restructure their operations, rearrange cash flow, business operations, and create cash flow that can be paid to people," said Mr. Toan.

However, Mr. Toan is concerned that there are still bond issuers who, if not honest, can still "force" bond buyers to accept their houses and offer high prices.

“This could very well open up another long-term struggle between bondholders and bond issuers in reaching a reasonable and harmonious agreement on the interests of both parties. The current advantage is leaning towards the issuers because they have a legal framework for negotiation,” said Mr. Toan.

The leader of this enterprise said that state agencies also need to closely monitor the implementation after the regulations are issued to avoid bond issuers making mistakes, forcing bond buyers, and creating further distortions.

“With these new regulations, bondholders are at a disadvantage because the legal framework allows the issuer certain rights, they do not violate the law. For bondholders, the best solution is to negotiate in groups, not individually; you can hire a lawyer or a reputable and capable unit to negotiate, ensuring your rights,” Mr. Toan recommended.

Meanwhile, Mr. Vu Van Quyet noted that if the swapped asset is real estate, it must be real property; many times the asset has not been formed or will be formed in the future, does not meet the conditions for sale or is not legally available, etc., which will affect the rights of bondholders.

“Regarding the price, both parties must agree on the market price or determine a price that both parties can accept. There also needs to be a financial appraisal organization to support bondholders in reviewing the legal factors of each asset, so that they can be assured about the converted assets,” Mr. Quyet added.

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