Banking and real estate are leading the way.
According to data from the Vietnam Bond Market Association (VBMA), the corporate bond market has become vibrant again, with the total value of new issuances reaching an impressive figure. From the beginning of the year to the end of August 2024, there were 227 private placements worth VND 215,583 billion and 13 public offerings worth VND 22,773 billion. In August alone, a total of nearly VND 49,000 billion was successfully raised through corporate bonds. Banks are leading the race to raise capital, with VND 42,000 billion in bonds issued. In second place is the real estate sector with nearly VND 5,000 billion raised through 7 issuances. In its recently published report on the Vietnamese economy, the World Bank (WB) noted signs of recovery in the corporate bond market. Issues increased 2.5 times in the first half of 2024 compared to the same period in 2023.
Corporate bonds, with the banking and real estate sectors consistently leading in issuance.
Notable examples include MB Bank successfully issuing 10,000 billion VND, Vietinbank issuing 5,000 billion VND,SHB issuing 3,000 billion VND, and Agribank issuing 10,000 billion VND... Real estate bonds have also recovered compared to the same period last year. For example, the Board of Directors of Kinh Bac Urban Development Corporation (KBC) recently approved a plan to issue private placement bonds in the third quarter with a maximum value of 1,000 billion VND. These are non-convertible bonds, without warrants, with collateral; a 2-year term and a fixed interest rate of 10.5% per annum.
The company stated that the funds raised will be used to restructure the debts of Kinh Bac and its member units. Becamex IDC also issued bonds twice in August with a total value of VND 500 billion. Major players such as Vinhomes, Sun Group , Nam Long, Khang Dien, etc., have also successfully issued bond tranches. MBS Research forecasts that corporate bond issuance activity will be more vibrant in the fourth quarter as the real estate market begins to warm up and production and business expansion activities become more active along with the economic recovery.
Vietnam Investment Credit Rating Joint Stock Company (VIS Rating) forecasts that in the second half of 2024, the banking sector will continue to account for the majority of the total value of new corporate bond issuances. This is because banks need to increase medium and long-term capital mobilization to meet capital adequacy ratios (CAR), especially in the context of boosting credit growth with a target of 15% increase for the entire industry in 2024.
For real estate businesses, in the first half of 2024, bond issuance activity recovered at a slow pace since the 2022 crisis of delayed principal and interest payments. While the demand for capital raising by real estate businesses remains very high, in the short term, these companies are prioritizing bank credit. Outstanding loans for real estate business operations from banks increased by 13.1% in the first six months of 2024, significantly higher than the overall credit growth rate.
Additional funding is needed to implement the project.
Not only is the corporate bond market warming up, but positive signs are also evident in the fact that many businesses have successfully negotiated payment extensions. This has given them more time and capital to implement their projects.
The Manor apartment complex
For example, at the end of 2023, Phat Dat Real Estate Development Joint Stock Company (PDR) announced the full repayment of principal and interest on bonds issued in 2021 and 2022. An Gia Real Estate Investment and Development Joint Stock Company (AGG) recently announced the settlement of its final bond issue worth 300 billion VND in May, thereby reducing its outstanding bond debt to zero. Similarly, Kinh Bac Urban Development Corporation (KBC) also officially reduced its outstanding bond debt to zero from the end of 2023.
According to Mr. Nguyen Van Dat, Chairman of the Board of Directors of Phat Dat Company, only after experiencing a crisis do we realize that cash flow is lifeblood. Therefore, in the coming period, Phat Dat will focus on many things, but cash flow must be prioritized. In particular, we will focus on sales, legal matters, and construction to transform internal resources into cash flow, preventing any further crises from occurring. The current favorable factor is the warming domestic real estate market, and capital channels such as corporate bonds are also growing well, helping businesses raise capital to invest in projects, launch products onto the market, and thus generate cash flow.
Mr. Nguyen Dinh Duy, Director and Senior Analyst at VIS Rating, believes that access to capital (including both bank credit and bond issuance) for real estate businesses will be easier in the second half of the year. Especially with three new laws related to real estate coming into effect on August 1, 2024, which will help developers resolve issues related to land valuation and land use rights, thereby accessing financing for new project development. Bond issuance is expected to recover, and real estate business credit is projected to increase by 16-18% in 2024. In addition, many listed real estate companies have announced plans to increase equity capital this year, with approximately VND 26,000 billion in new equity capital expected to be raised for project development or to repay maturing debt. All of these factors will help investors alleviate liquidity difficulties caused by the large debt burden maturing in 2024 and 2025.
Phan Dung Khanh, Director of Investment Consulting at Maybank Investment Bank and founding member of the Vietnam Association of Financial Managers, commented: "The quietest period for the corporate bond market is over, and currently, the issuance value has increased, and liquidity has improved. The number of companies defaulting on interest payments has gradually decreased. Another phenomenon is that previously, interest rates on bonds issued by real estate companies were among the highest, but now they are trending downwards. This indicates that capital is less strained. If previously the interest rates on bonds from banking and real estate were vastly different, they are now closer. Currently, businesses have also negotiated with bondholders to extend bond terms. This gives businesses more time to arrange financing or restructure debt. Instead of declaring insolvency, they can negotiate with investors to extend the term and continue repaying debt in the future," Mr. Phan Dung Khanh stated.
Experts generally agree that the warming trend in the corporate bond market, especially in the real estate sector, stems from several positive factors that have helped restore investor confidence. Simultaneously, it has enabled businesses to restructure debt and continue project development, thereby improving their ability to repay bondholders. Some large real estate companies have also had the opportunity to restructure their operations, streamline their processes, or accelerate the completion of ongoing projects to improve cash flow and increase their bond repayment capacity. The continued increase in demand for real estate, particularly housing, in certain areas will further provide opportunities for developers to recover capital from projects, thereby improving their financial health and leading the market into a more sustainable development phase.
According to VIS Rating data, the corporate bond market currently stands at approximately VND 1.2 trillion in face value, equivalent to nearly 11% of the nominal GDP of 2023. According to the Government's orientation in the Securities Market Development Strategy to 2030, the target size of the corporate bond market is 25% of GDP by 2025 and 30% of GDP by 2030. It is estimated that to achieve this goal, the amount of new issuance must reach VND 800,000 - 900,000 billion annually. The message from the Government indicates that, despite recent setbacks, corporate bonds remain a crucial capital mobilization channel for the economy.
Source: https://thanhnien.vn/trai-phieu-doanh-nghiep-am-lai-18524100916444102.htm
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