Temporary solutions to clear the bond market

The bond market has grown significantly over the past 5 years until 2022. In fact, the bond market has grown strongly by 30-40% each year and by 2022, the total outstanding corporate bonds are accounting for 15% of GDP.

Comparing the potential and correlation with the regional market, the Vietnamese Government sets a target of the corporate bond market size reaching 20% ​​of GDP by 2025 and at least 25% of GDP by 2030.

With the increasing scale of capital mobilization, the capital market has been affirming its importance as an effective medium and long-term capital mobilization channel for enterprises in accordance with the State's orientation on balanced development of the capital market and credit market, reducing the pressure on capital supply for the economy from the bank credit channel.

In early 2022, the individual corporate bond market in particular and the entire financial market in general suffered a widespread psychological shock when investors witnessed incidents at Tan Hoang Minh, FLC, Van Thinh Phat...

The negative events mentioned above have caused a decline in investor confidence combined with difficulties in the liquidity of bond repayment cash flows of many businesses, making the capital mobilization channel through bonds even more risky.

In fact, the decline in capital mobilization through the corporate bond market is increasing the pressure on investment capital and liquidity shortages of many real estate enterprises, especially those with large volumes of maturing bonds, while revenue and business profits have decreased sharply in the context of global economic difficulties.

Businesses lacking capital, investors stuck with money - two subjects of the economic and financial market are currently finding it difficult to find a point of intersection and are both falling into a state of congestion.

Financial Expert Nguyen Tri Hieu.

In that context, the Ministry of Finance has had a temporary solution by issuing a series of Decrees 65 to 08 to amend and supplement provisions to help improve the corporate bond market.

However, the issuance of Decree 08 clearly shows the confusion of the Ministry of Finance in handling outstanding issues in the corporate bond market in recent times.

For businesses, Decree 08 will certainly be welcomed because it helps businesses extend the time to repay bonds, removing difficulties for issuers.

But in essence, Decree 08 does not fundamentally resolve difficulties but is only a temporary measure to help clear the market. If we consider some points, Decree 08 even makes the bond channel more risky.

For investors, Decree 08 has almost no impact, does not provide the terms or information that investors are interested in, especially in terms of improving confidence - something that investors are lacking at the moment, it has almost no effect on change.

Specifically, Decree 08 stipulates that the implementation period of regulations on professional securities investors has been suspended until December 31, 2023, thereby creating conditions for individual investors to access the bond channel.

However, it is precisely because individual investors do not fully understand the new bond investment market that many negative problems arise. Now, delaying the tightening of individual investors may create many other negative problems.

Next, allowing businesses to exchange assets for bonds also raises many concerns.

Because the exchange of assets for bonds has been happening for many years, but the license to exchange assets can still cause many businesses to push the price of assets up, not at their real value, to force investors to exchange bonds. Investors are worried and afraid of losing money, so they have to accept losses to get "every penny is worth every penny".

Not to mention, there are cases where individual investors own a small number of bonds. If they want to exchange assets, they have to continue to pay more money. Meanwhile, when the economy is difficult, it is very difficult for investors to make the exchange.

In the case of no asset exchange, individual investors will have to consider the option of agreeing to let the enterprise extend the bond. The issue of extension is also likely to appear negative because in reality, with the current difficulties of the financial market, it is very difficult for the economy to recover quickly.

Therefore, whether the bond is extended for 6 months, 1 year or 2 years, whether the enterprise can restore production and business to have cash flow to pay investors or not is still an unanswered question.

However, Decree 08 still reveals some rare positive points such as removing constraints to make it easier for the bond market to trade, buy and sell, and create liquidity.

In that context, in order to get back their assets, bondholders need to organize a bondholders' conference. Thereby, investors can exchange, discuss and propose solutions to the issuing organization such as allowing debt extension, threatening to sue or being ready to negotiate.

In addition, bondholders need to find a law firm representing investors that will be the legal entity responsible for handling legal issues arising during the negotiation process.

And finally, the most important thing to do to regain investor confidence is to conduct a credit rating.

Many years ago, experts shouted that the bond market was taking the financial burden off banks, before banks were midwives of businesses, then the midwife changed to bonds.

Meanwhile, the Vietnamese market does not have enough foundation to develop the bond market "hotly", so it is necessary to restrain the development of the bond channel, build a complete legal corridor, a clear and transparent legal foundation, and then continue to promote the growth of this investment channel .

Nguyen Tri Hieu - Finance and banking expert

Source: https://www.nguoiduatin.vn/giai-phap-tinh-the-lam-thong-thoang-thi-truong-trai-phieu-a604592.html