Property developers scramble to delay bond repayments

The latest company to make such an announcement is the Dat Xanh Group, which said Friday that it was not able to pay a total interest of over VND3 billion ($126,400) to bond holders, missing the deadline for two terms in a row.

An Khai Hung Investment was supposed to redeem VND180 billion worth of bonds in mid-February but has only been able to pay the interest. It now owes bond holders VND178 billion.

Novaland in the end of last month said it was owing VND1 trillion plus VND53 billion in interest for an issuance in October 2021.

FiinRatings, a domestic credit rating firm, said that most companies that are late in redeeming bonds have seen plunging revenues.

Most companies are now negotiating with bond holders to prolong the duration of the payment.

The Dat Xanh Group has proposed paying interest quarterly instead of monthly.

Novaland is asking bond holders to delay payment and proposed that they exchange their bonds for properties or a stake in a project it is developing.

Le Hong Khang, director of ratings at FiinRatings, said that negotiating with bond holders will be a challenging task for property developers this year as there is a big payment pressure coming up in the next two quarters.

Around VND205 trillion worth of corporate bonds are set to mature this year and VND223.15 trillion next year, and property developers account for half of both, he said.

“The large payment pressure and declining profits will increase the number of property developers that are unable to pay,” said Khang.

The ratio of interest payments of property developers has dropped to a 10-year low and shows the high risk that they will be unable to pay their debt, brokerage VNDirect said in a report.

Many bond holders are selling their bonds for cash with a discount of 14-17% from what they paid originally, it added.

Nguyen Quoc Hiep, chairman and CEO of GP Invest, said that many companies have issued too many bonds in recent years and this is now having an impact on the financial market and lowering people’s confidence in the property sector.

He proposed that two state-owned companies, Debt and Assets Trading Company (DATC) and Vietnam Asset Management Company (VAMC), be allowed to evaluate projects that are being developed with bonds to reduce bad debt and bring down market pressure.