Active issuance of convertible bonds to restructure debt.

Instead of rushing to dilute shares during a period of unpredictable volatility, many listed companies are using convertible bonds as an effective financial tool to restructure their debt.

Issuing convertible bonds has become a preferred fundraising channel for many listed companies in the first half of this year.

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According to the offering plan, July 16th is the deadline for receiving funds from investors in the convertible bond issuance of Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII). The company is offering 20 million convertible bonds (code CII425001) to the public, aiming to raise 2,000 billion VND to restructure its debt.

The aforementioned convertible bonds of CII have a 10-year term, with 9 conversion tranches to be implemented annually starting from the beginning of 2027. The conversion price is VND 12,500 per share, nearly 20% lower than the current market price. The bond interest rate is a combination of fixed and floating rates. At the annual general meeting of shareholders, CII General Director Le Quoc Binh stated that the company issued the convertible bonds with the expectation that the return on investment from the project would be higher than the interest rate on deposits.

Issuing convertible bonds has become a preferred fundraising channel for a number of listed companies in the first half of this year, all aimed at restructuring debt. Most recently, TCO Holdings (TCO) completed a private placement of VND 260 billion in convertible bonds, with a 1-year maturity and a fixed interest rate of 9% per annum. The bondholders were two existing shareholders.

The aforementioned rice-producing company is raising capital to make early repayments on personal loans previously taken out to purchase the Enterprise Tower office building, which comprises two basement levels and fifteen above-ground floors. These loans, scheduled to mature in June-July 2026, all have relatively high interest rates, commonly around 10% per year.

Notably, many organizations are targeting existing shareholders for their bond issuances. Thanh Thanh Cong - Bien Hoa Joint Stock Company is undertaking a public offering of nearly 5 million convertible bonds worth VND 500 billion, with a fixed interest rate of 9.5% per year and a term of 1 year. All proceeds will be used to repay loans to its subsidiary (Bien Hoa Consumer Goods Joint Stock Company).

The right to purchase bonds will be allocated to existing common shareholders at a ratio of 16.291:100. Upon maturity, the bonds may be converted into unrestricted common shares at a price equal to 80% of the average closing price of SBT shares in the 30 trading sessions immediately preceding the issuance date.

Recently, Ba Ria - Vung Tau Housing Development Joint Stock Company (Hodeco, ticker HDC) also planned to raise nearly 500 billion VND from shareholders through the issuance of convertible bonds to existing shareholders in 2025. The conversion price is 10,000 VND per share. The bond interest rate is fixed at 10% per year, with a term of 2 years.

Shareholders owning 35,671 shares are entitled to purchase 1,000 bonds with a face value of VND 100,000 per bond. The bonds are convertible into shares in two tranches: one after the first year (40%) and on the bond's maturity date. Hodeco stated that it will use the capital raised to repay loans at several banks.

Temporarily reduce dilution pressure.

Issuing convertible bonds is essentially a hybrid fundraising channel combining debt and equity. In Hodeco's case, it can reduce short-term payment pressure and restructure debt. Furthermore, the ability to convert them into equity in the future, instead of immediately issuing shares, helps businesses temporarily mitigate dilution pressure, especially when facing numerous business challenges in the coming year.

“During the period 2025-2027, through its subsidiary, Nam Bay Bay Investment Company, CII will invest in two real estate projects, NBB II and III. After these two projects are completed, the company will continue to put the Trung Luong - My Thuan expressway project into operation. The company has short-term strategies for real estate projects and long-term strategies for a sustainable and efficient portfolio,” a CII leader once said about the projects it aims for in the near future.

In 2025, TCO Holdings has set a rather cautious business plan, aiming for revenue of VND 3,000 billion and after-tax profit of VND 44 billion for the fiscal year 2025, which runs from January 1, 2025 to September 30, 2025.

Besides the fact that this year's fiscal year is only 9 months long, at the 2025 Annual General Meeting of Shareholders, the Company's leadership also acknowledged that the rice industry this year faces many challenges, from sharply falling rice prices and stagnant exports to limited access to credit. TCO's operations in drying, milling, and polishing will also be affected as customers face difficulties.

CII is one of the few listed companies that "prefers" the convertible bond issuance channel. As of December 31, 2024, the company had outstanding balances on two convertible bond codes: CII424002 with a balance of VND 2,811 billion and CII42013 with a balance of nearly VND 15 billion. After the first quarter of the year, nearly VND 2,300 billion worth of bonds had been converted at a conversion price of VND 10,000 per share.

Also in the first quarter of 2025, CII's share price remained stable around 14,000 VND/share. During the sharp decline in early April 2025 due to the impact of information on the US's retaliatory tax policy, this was also one of the most volatile stocks, with its share price at one point nearing its par value.

Of course, expectations of the stock's potential could still push the share price higher. Four bondholders of Hai An Transport and Loading Joint Stock Company (HAH) agreed to convert 203 bonds (HAHH2328001) into more than 8.55 million HAH shares, at a conversion price of VND 23,739 per share, less than half of the closing price at that time. Thanks to expectations of profit growth in the second quarter, HAH shares continued to surge strongly in May and are currently pegged at a relatively high level (nearly VND 70,000 per share), bringing "sweet rewards" to bondholders who converted and continue to hold the shares.

Source: https://baodautu.vn/soi-dong-phat-hanh-trai-phieu-chuyen-doi-co-cau-lai-no-d331815.html