Burdened by real estate bond debt.

Real estate companies that issue bonds still face significant debt repayment pressure, and many are even at risk of default.

According to recent information released by the Hanoi Stock Exchange (HNX), Nam Land Co., Ltd. is currently issuing bond issue NALCH2124001, with a total issuance value of VND 900 billion, a 3-year term, an interest rate of 10.3% per annum, and an expected maturity date of July 13, 2024.

In 2023, Nam Land had four bond interest payments due. For the first payment (January 13th), the company was required to pay 25 billion VND, but was unable to secure the necessary financing. It wasn't until February 28th, 2023, that the company managed to secure the cash flow and proceeded with the interest payment.

Meanwhile, for the second installment (April 12, 2023), the company had to pay 26 billion VND in interest, but only managed to secure 50%, leaving the remaining 50% unpaid. For the third and fourth installments, Nam Land had to pay over 54 billion VND in interest, but had not yet secured the necessary financing.

Explaining the inability to pay bond interest on time, a representative from Nam Land stated that a series of legal obstacles have repeatedly led to the Shizen Home project being denied the sale of future housing units, resulting in a loss of revenue to pay the principal and interest on the bonds as committed to bondholders. In addition, consecutive business losses over the past two years have also significantly impacted the company's cash flow.

Not only Nam Land, but many other large real estate companies are also facing pressure to repay debt from bonds. A report on the corporate bond market by Vietnam Investment Credit Rating Joint Stock Company (VIS Rating) shows that, as of the end of April 2024, the rate of delinquent bonds across the market was 15%, unchanged from March 2024.

Notably, more than half of the bonds with defaulted principal or interest payments came from the residential real estate sector, with the sector's default rate for principal and interest payments reaching 30%.

Khải Hoàn Land Group has just approved extending the maturity of bond code KHGH2123001 until April 5, 2025, adjusting the interest rate to 12% per year. Thus, after extending the maturity by one year in 2023, Khải Hoàn Land is continuing to extend the bond maturity for another year.

For example, Unity Real Estate Investment Co., Ltd., as of December 31, 2023, had equity of VND 2,916.1 billion, a slight decrease compared to VND 3,089.6 billion in 2022. The debt-to-equity ratio decreased slightly from 1.4 times in 2022 to 1.37 times in 2023, corresponding to liabilities exceeding VND 3,995 billion.

The bond debt-to-equity ratio increased from 0.32 times in 2022 to 0.38 times in 2023, corresponding to VND 1,108.1 billion in bond debt. Unity Company extended its losing streak, recording a net loss of VND 173.5 billion in 2023 (compared to a net loss of VND 124.2 billion in 2022).

According to VIS Rating data, in May 2024, 28 bond issues from 24 issuers, worth VND 15 trillion, will mature. Of these, VIS Rating estimates that approximately VND 4,700 billion, equivalent to 30%, is at risk of defaulting on payments due in May 2024.

Of the 4.7 trillion VND worth of high-risk bonds, approximately 4 trillion VND were issued by three companies that defaulted on interest payments in 2023. VIS Rating assesses that these issuers are highly likely to default on principal repayments due to weak cash flow and depleted cash reserves. The remaining 700 billion VND of high-risk bonds, mostly issued by companies in the residential real estate sector, are experiencing first-time defaults.

Commenting on the debt repayment capacity of residential real estate companies, given that the amount of real estate bonds maturing this year is the highest in the past 5 years, Mr. Duong Duc Hieu, Director of Credit Rating and Analysis, Non-Financial Enterprise Segment at VIS Rating, said that the debt repayment capacity of residential real estate companies remains weak.

One point to note is that the disparity in debt repayment capacity will widen. For businesses with projects focused on meeting real housing needs in major cities like Hanoi and Ho Chi Minh City, sales remain relatively strong and are expected to recover in 2024. These businesses will have significantly better resources and a higher debt repayment capacity.

Conversely, some businesses remain in a difficult situation because they previously focused heavily on highly speculative projects. In 2024, demand for this segment remains low, therefore, the debt repayment capacity of this group will be weak.

“Real estate businesses have three main channels for raising capital: bank loans, bond issuance, and equity issuance. In 2024, VIS Rating assesses that the real estate sector's access to new capital will improve. Each business will prioritize different fundraising methods, but the cheapest form of fundraising for businesses is equity issuance, and this will be the fastest-growing channel this year,” Mr. Hieu said.

Source: https://baodautu.vn/nang-ganh-voi-khoan-no-trai-phieu-bat-dong-san-d215926.html