Where do businesses get money to pay debt?

Bond issuance decreased by 61% over the same period

According to data from the Hanoi Stock Exchange, in March 3 (as of March 2024), there were only 25 businesses successfully issuing bonds: Business Investment and Commercial Development Company Limited. Viet An (issued 3 billion VND) and Hai Dang Real Estate Investment and Development Company Limited (2 issuances totaling 1.250 billion VND).

Thus, in the first 25 days of March 3 (calculated based on the date of information announcement), the amount of corporate bonds issued only reached a mere 2024 billion VND, down 3.750% compared to the same period in March 85,5. Accumulated in the first 3 months of this year (as of March 2023), the amount of corporate bonds issued reached 3 billion VND, down 25% compared to the same period last year.

While new bond issuance has decreased sharply, the pressure on bond maturity from now until the end of the year for real estate businesses is huge. From the beginning of the year until now, businesses have had to spend nearly 14.000 billion VND to buy back bonds before maturity (of which more than 41% were real estate bonds).

According to FiinGroup's estimates, the amount of corporate bonds due in 2024 is more than 300.000 billion VND, of which, real estate bonds alone are more than 130.000 billion VND.

Mr. Nguyen Quang Thuan, General Director of FiinRatings, said that the ability to repay bonds is still a big challenge for real estate businesses. Although credit capital partly supports cash flow for real estate businesses, issuing businesses cannot rely entirely on this capital source to complete bond repayment obligations. Meanwhile, the real estate market has not really improved.

In 2023, the amount of deferred corporate bonds will reach nearly 190.000 billion VND (bad debt accounts for about 23,5% of the total outstanding value at the end of 2023). However, according to analysts, the positive thing is that the number of late-paying bonds will decrease sharply in 2024.

“In 2024, delinquent bonds are expected to decrease sharply, to VND 40.000 billion, belonging to 35 issuing enterprises. Half of these are "shell" businesses, meaning businesses established for the sole purpose of issuing corporate bonds, without core business activities. The rest are other businesses. The amount of high-risk bonds is concentrated in the fourth quarter of 2024", said Mr. Nguyen Dinh Duy, Director of Analysis of Rating and Research Division (VIS Ratings).

Where do real estate businesses turn to mature money?

The real estate market started to show signs of recovery from the end of 2023, but the recovery speed is still slow, mainly warming in the apartment segment. Project licensing activities are still slow, making it difficult for supply to improve quickly in the coming time. From the beginning of the year until now, many investors have moved to open sales. This is a positive sign for the whole year 2024. However, the supply-demand balance has not been able to improve, leading to continued difficulties in the financial health of investors.

“The ability to repay debt to investors is at its lowest level in many years as of the end of 2023 and this ability has not improved clearly in 2024, if viewed from the financial leverage used by these businesses, especially especially the amount of corporate bonds maturing. However, I think that real estate businesses will not experience any liquidity shock in 2024, thanks to other capital access channels - especially bank credit and stock issuance - being quite favorable. From the beginning of the year until now, real estate business credit has grown positively, although general credit growth has been negative. Besides, many real estate businesses also have advantages in issuing shares to increase capital," said Mr. Duong Duc Hieu, Senior Analyst Director of Ratings and Research Division (VIS Ratings).

In addition to cash flow coming from bank credit and stock issuance, economic experts also expect that corporate bond issuance in 2024 will gradually improve in the second half of the year, helping real estate businesses fulfill their obligations. bond repayment.

Starting this year, Decree 65/2022/ND-CP will be fully implemented, better protecting investors, expected to bring confidence to individual investors as well as attract more participation. than that of institutional investors.

Analysts expect that the corporate bond market in 2024 will recover thanks to the leadership of two industry groups: banking and real estate. As for real estate bonds, the recovery speed will depend greatly on the speed of improvement of the legal corridor as well as the project licensing progress of localities.

Another factor supporting the bond market's recovery is interest rates. Dr. Le Xuan Nghia, an economic expert, said that interest rates in 2024 will continue to remain at a low level, creating attraction and good support for the corporate bond market to recover.

However, because the number of participants in the corporate bond market is narrowed (Decree 65/2022/ND-CP has tightened conditions for individuals participating in buying and selling corporate bonds), this market should be allowed to boil. Once active again, the most important factor is still improving procedures for issuing bonds to the public and expanding the institutional investor base. To do so, regulations related to stock investment funds, bond funds, pension funds, insurance companies... need to be expanded to boost demand for corporate bonds. Individual investors can participate in corporate bond investment through professionally managed funds or bonds issued to the public.