Revealing the biggest headache for real estate businesses in the next 3-6 months

Pressure from bond maturity

Recently, the Hanoi Stock Exchange (HNX) announced a list of issuers that are late in paying principal and interest on bonds between September 16, 2022 and January 31, 2023. According to this list, 54 enterprises are late in paying principal and interest on bonds. Of these, 34 enterprises operate in the real estate and construction sector.

In terms of value, about VND23,000 billion worth of bonds from these organizations will mature in 2023, of which 90% come from real estate businesses .

Many units have to find ways to have a source of bond payment. For example, No Va Real Estate Investment Group Joint Stock Company ( Novaland - stock code: NVL) restructured and negotiated a debt-for-equity swap agreement with a foreign partner. Accordingly, investors will receive a portion of equity in two member companies of Novaland: Thanh Nhon Real Estate Investment Company Limited and Mui Ne General Investment Joint Stock Company in exchange for canceling a corresponding number of bonds and warrants.

Another case is Duc Long Gia Lai Group Joint Stock Company (code: DLG) also cannot pay more than 180 billion VND of principal and interest on time to investors on December 30, 2022. This enterprise is negotiating and reaching an agreement with bondholders to extend and extend the payment period.

Research by VnDirect Securities shows that the liquidity of real estate businesses will be under a lot of pressure in the next 3-6 months when entering the peak period of bond maturity.

Estimated figures show that about VND37,642 billion of real estate corporate bonds will mature in the second quarter of 2023, up 306.4% year-on-year, and VND65,905 billion (up 13.3%) in the second half of 2023.

Hé lộ điều khiến doanh nghiệp bất động sản đau đầu nhất trong 3-6 tháng tới - 1 — Real estate businesses face liquidity pressure as the next 3-6 months enter the peak period of bond maturity (Photo: Ha Phong).

Positive moves

After the national online conference chaired by the Prime Minister on February 17, the Government issued a draft Resolution on a number of solutions for the real estate market.

The first is to propose extending principal and interest payments for businesses facing difficulties. The second is to continue providing credit to real estate projects with feasible loan plans, customers with financial potential, and reducing lending interest rates. The third is to propose a VND110,000 billion credit package for social housing and housing for workers, similar to the VND30,000 billion package issued in the 2013-2016 period.

In addition, the latest draft amendment to Decree 65 proposes to allow issued bonds to negotiate for an extension and relax some issuance conditions.

Experts say that if these policies are implemented, they will help reduce liquidity pressure for real estate businesses in the short term.

According to Mr. Nguyen Chi Thanh - Vice President of Vietnam Real Estate Brokers Association - there needs to be a restructuring plan, especially for bonds, for businesses that are unable to pay principal and interest.

If a business has bonds that are due but do not restructure, it poses a risk to the bank. If the bank wants to lend, the business must have a feasible restructuring plan and demonstrate its ability to repay the debt.

Sharing on VTV , Mr. Barry David Weisblatt, Director of Investment Strategy, SSI Fund Management Company Limited (SSIAM), said that handling the bond issue depends on each enterprise and each specific type of bond.

In the short term, businesses can consider restructuring loans for a few years, selling off assets and projects. In the long term, applying Decree 65 will be very good for the corporate bond market when there are requirements on ratings and regulations on investors.

Besides helping businesses overcome liquidity difficulties in the coming time, restoring homebuyers' confidence is also an urgent issue for the real estate market to "reverse".

Mr. Quoc Anh, Deputy General Director of Batdongsan.com.vn, commented that a trigger is needed to reduce the pressure on confidence through a stimulus package. For example, in the past, with the support package of 30,000 billion VND, interest rate of 5-6%/year, the social housing segment helped to recreate the trading habit in the market. Since then, the market has started to return.

Currently, the proposed VND110,000 billion credit package for social housing and housing for workers is also expected to create a similar effect.

However, there are also bright spots in the financial health of real estate companies. VNDirect’s analysis based on the financial reports of 210 real estate companies (including 118 listed companies and 92 unlisted companies) shows that the financial health of listed real estate companies is currently better than in the 2011-2013 period.

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