The burden of maturing bonds weighs heavily on the shoulders of real estate businesses.

Challenges remain as the real estate market sees many businesses unable to restructure their finances to pay the principal and interest on maturing bond packages.

Hung Thinh Land is facing difficulties with maturing bonds.

Many businesses have had to extend bond payments.

Recently, Capital Securities Joint Stock Company issued a notice of default on payment of a VND 1,600 billion bond issue with Hung Thinh Quy Nhon Entertainment Services Joint Stock Company, due to the failure to pay 70% of the remaining bond interest in the 9th interest calculation period and 10% of the total bond interest in the 10th interest calculation period.

Accordingly, this bond issue was issued on May 26, 2021, with a term of 48 months, meaning the maturity date is May 26, 2025. However, this bond issue is required to mature on June 11, 2024, due to a breach of contract.

However, by this deadline, the issuer was still unable to make the payment, citing unfavorable developments in the financial and real estate markets, which prevented the issuer from securing the necessary funds to pay the bond interest on time as planned.

Another company, Hung Thinh Land, is also facing difficulties in settling its maturing bond issues. The company recently announced a delay in paying the principal and interest on a bond issue with a total face value of VND 600 billion, issued on June 11, 2021, and maturing on June 11, 2024.

Faced with challenging market conditions, many businesses have addressed bond debt by reaching agreements with investors and bondholders to extend the bond's maturity period for a certain period.

Hung Thinh Land stated that due to unfavorable developments in the financial and real estate markets, the company was unable to secure the necessary funds to repay the principal and interest on its bonds on time as planned. Previously, the company had made three early repurchases of a portion of its bonds in May 2024, totaling VND 72.4 billion, and still has VND 527.6 billion outstanding that it was unable to repurchase on time.

In November and December of this year, Hung Thinh Land still has 8 bond issues maturing, with a total outstanding value of approximately VND 2,250 billion. The majority of these bond issues were partially repurchased before maturity.

Along with Hung Thinh Land, other companies such as DCT Partners Vietnam, Ngoc Minh Investment and Real Estate Company Limited, and Novaland are being included in the list of companies with high-risk bonds by Vietnam Investment Rating Joint Stock Company (VIS Rating), with VND 5,800 billion of principal and interest payments likely to be delayed in June 2024 due to weak cash flow and depleted cash reserves.

The proportion of corporate bonds with credit ratings remains low.

VIS Rating reports that this month, 41 bond issues from 34 issuers, totaling VND 23 trillion, will mature. It is estimated that approximately VND 6.9 trillion, or 30%, is at risk of default on principal/interest payments; VND 1.1 trillion of high-risk bonds, with first-time defaults, belong to issuers in the residential real estate sector. VIS Rating notes that these issuers have average profit margins over the past three years that are below 10%, or even negative, and their funds to repay maturing debt are depleted.

Over the next 12 months, according to VIS Rating, approximately 19% of outstanding bonds, totaling VND 216 trillion, will mature. It is estimated that 9% of these are high-risk bonds, primarily in the residential real estate and construction sectors.

"Positive signs have emerged in the bond market as issuance activity has started to pick up again. However, the market has not yet shown an improvement in confidence as a significant amount of corporate bonds have low credit ratings," VIS Rating noted.

According to observations by reporters from the Investment Newspaper, in the face of difficult market conditions, many businesses have dealt with bond debt by reaching agreements with investors and bondholders to extend the bond term for a certain period, liquidating the collateral assets of the bonds to settle the debt, or exchanging bonds for other assets…

For example, Khai Hoan Land recently extended the maturity of its bonds by one year, after having already extended it by one year in 2023. Specifically, Khai Hoan Land approved the extension of the maturity of bond code KHGH2123001 until April 5, 2025, adjusting the interest rate to 12% per annum. As of the end of 2023, Khai Hoan Land had outstanding debt on 3 bonds with a total face value of VND 840 billion.

The extension is seen as a temporary solution, because negotiations only delay the payment deadline and in many cases force businesses to bear higher interest rates. Furthermore, capital raised through corporate bonds will remain limited, mainly available to large, reputable companies with clear legal collateral.

Source: https://baodautu.vn/trai-phieu-den-han-triu-nang-doi-vai-doanh-nghiep-dia-oc-d218269.html