Saturday , May 25 2024

Corporate bond repayment pressure increases in December

Some VND20.2 trillion (US$841.6 million) worth of corporate bonds are due for redemption in December, while next year hundreds of trillions worth are set to mature.

A recent report by VNDirect Securities Corporation shows a sharp spike in redemption pressure in December from the previous two months.

It will ease somewhat in the first two months of next year before quickly rising again. By April companies will have to pay out nearly VND34.5 trillion.

Over the year it will rise to VND297 trillion, the highest amount in years and three times the 2020 figure.
Property firms will account for the highest amount: VND123 trillion.

Meanwhile, premature redemption is declining. VNDirect data puts it at just VND5 trillion in November, down 72% from October and among the lowest levels in the last two years, as many sectors, especially property, remained in a slump and without cash flows.

According to credit rating firm VIS Rating, property development and construction firms are often in poor financial health as demonstrated by their high financial leverage and low cash reserves.

The debt-to-income ratio before interest, taxes, depreciation, and amortization of property companies that had issues bonds as of the third quarter of this year was 10.2, the highest of any industry.

Anticipating redemption pressure in future, companies are proactively negotiating with bondholders.

The Hanoi Stock Exchange announced that, as of Nov. 27, 64 companies had reached debt settlement agreements for VND111 trillion worth of bonds.

In addition to extending the maturity, businesses also negotiated cuts in interest rates, change in interest payment terms and extension of the principal payment schedule for bonds worth a total of VND8.1 trillion.

VIS Rating said besides receiving support from bondholders, businesses themselves have improved their ability to repay thanks to a recovery in business and cash flows and the availability of new financial sources.

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