Real estate businesses seek restructuring of overdue, coming due bonds

Many bonds are about to mature this year and overdue bonds are putting great pressure on real estate businesses. Photo chinhphu.vn

HCM CITY — The pressure of maturing bonds is still weighing heavily on real estate businesses in the HCM City, forcing these businesses to find solutions to restructure debt.

The fact that these real estate businesses are forced to transfer or divest capital from real estate projects in order to restructure debt has made the real estate market in the city become more vibrant recently.

VRC Real Estate and Investment Joint Stock Company is transferring part or all of the compensated land area of an urban area project in Nhà Bè District. It is expected that the company will get at least VNĐ747 billion (about US$30 million) after the transfer.

Previously, VRC also approved the transfer of part of the ADC residential project in District 7 for a price no lower than VNĐ800 billion ($32.1 million).

The transfer amount is expected to supplement capital needs for VRC’s business activities, in the context that this enterprise cannot pay the VNĐ47.3 billion of principal of the bond batch that matured in April.

Similarly, Hải Phát Investment Joint Stock Company also decided to divest 19.93 per cent of charter capital (equivalent to more than VNĐ190 billion) at Hải Phát Thủ Đô Investment Joint Stock Company. At the same time, this company also transferred all 14.02 per cent of charter capital at Civil Engineering Construction Corporation No.5 (equivalent to contributed capital of VNĐ83.5 billion).

The proceeds help Hải Phát supplement business capital and reduce financial pressure from bond debt and bank loans. Previously, the Hà Nội Stock Exchange said that by the end of 2023, Hải Phát still had outstanding debt of VNĐ1.49 trillion ($60 million).

The Board of Directors of Development Investment Construction Joint Stock Corporation (DIG Corp) also approved the transfer of part of the Vị Thanh Commercial Residential Area project in Hậu Giang Province and part of the Cap Saint Jaques Complex project in Bà Rịa-Vũng Tàu Province.

Besides transferring and divesting capital, some real estate companies also promote debt restructuring through agreements with bondholders.

Novaland Group said it had completed an agreement to restructure a bond package worth nearly $300 million with an interest rate of 5.25 per cent (maturing in 2026) with the right to convert into common shares.

In addition, at the end of June, Novaland agreed to extend eight bond packages with a total issuance value of nearly VNĐ3.11 trillion ($124.9 million), changing the bond term to 60 months to mature from June to August 2025.

The group’s subsidiaries also reached similar positive agreements.

The completion of the restructuring of bond lots and many positive signals about liquidity would help the group reduce financial pressure that affects Novaland’s business operations. From there, it was creating favourable conditions for the company to recover and time to balance cash flow and stabilise business operations.

In recent times, many businesses have found ways to extend or postpone bond payments. However, the pressure of maturing bonds is still very present and is one of the challenges for this industry’s recovery process this year.

According to the Việt Nam Bond Market Association (VBMA), in the second half of 2024, it is estimated that about VNĐ140 trillion ($5.6 billion) of bonds will mature. Of this amount, the majority are real estate bonds worth about VNĐ60 trillion, equivalent to 42 per cent of the total. In June, businesses bought back VNĐ13.3 trillion of bonds before maturity, down 68 per cent compared to the same period in 2023.

A report by VISRatings in June showed that the rate of delinquent bonds in the entire market at the end of May 2024 was at 16.1 per cent, an increase of one percent compared to the end of 2023. About 65 per cent of delinquent bonds were from the real estate industry (deferred payment rate up to 31 per cent).

A recent survey by the HCM City Union of Business Associations (HUBA) also showed that although real estate businesses had received significant support from the State, they still continued to have a more difficult cycle than other industries. The reason was due to previous investment mistakes with large loans, lack of cash flow and high interest rates.

In particular, real estate businesses are still facing a huge bond debt volume of up to VNĐ350.9 trillion, of which the estimated value coming due in 2024 is about VNĐ100 trillion, according to HUBA. Many businesses, especially small businesses, are running out of cash flow.

Therefore, HUBA recommends that the City needs to quickly implement three laws related to the real estate market, including the Land Law, Housing Law and Real Estate Business Law, which are expected to take effect from next month. The rapid implementation of these laws will create conditions for the market to recover quickly, remove bottlenecks and create jobs for businesses.

At the same time, the city should also promote the piloting of a number of specific development mechanisms and policies of the City to meet the development needs of people and businesses. — VNS