Illustrative image (Photo: tuoitre.com.vn) The corporate bond market remained quiet in the first month ofthis year, with a large number of maturing bonds. Of which, half of the bonds -104trillion VND (4.37 billion USD) maturing out of around 205 trillion VND - wereissued by property developers.
According to FiinRatings, only one batch of private placementbonds worth 110 billion VND was successfully issued by Phan Vu InvestmentCorporation in January. These bonds' term is five years, with a nominal rate ofinterest of 10.5% a year. And Asia Pile Holdings is the batch's solebondholder.
Nguyen Tung Anh, head of the Credit Analysis and Green FinancialServices Department of FiinRating, said that low demands and supplies on themarket were attributed to the steep reduction in the size of bondissuance.
In the midst of the market's stagnation, Novaland recentlyproposed a solution for its two batches of bonds that are to due byextending the principal payment date for an appropriate period of time orconverting the principal with the company's real estate.
According to the property developer, the solution is force majeureas the market still has many unpredictable fluctuations which is in line withthe document relating to bond issuance.
It assured that the proposal was legal and in accordance with thedecree's directives.
Therefore, it was expected that the decree amendment would helpthe bond market recover.
"The new decree is required due to the high liquiditypressure enterprises faced at the end of last year when 12 issuers in the realestate and energy industries breached debt obligations such as late payment ofinterest and/or principal," Tung Anh said.
Similarly, Dr. Le Duc Chi of the University of Economics Ho Chi MinhCity's School of Finance stated that the conversion of bond debts intoproperties would be a necessary solution because it would help companies reduceinventories, relieving pressure on cash flows.
Risks in bond payment by properties
However, bondholders may refuse to agree to convert bond debtsinto real estate debt, according to Pham Duc, an attorney of the HCM CityBar Association.
He said that with this kind of payment, bondholders would be at adisadvantage because they would not receive interest, while assets haveextremely low liquidity, especially when the property market is merely frozenand the volatility of realty prices is unpredictable in the future.
"If bondholders insist on cash payments but the enterprisesare unable to settle, the enterprises' bank loans will become bad debts. They,then, can't access capital to retain and develop their projects," hesaid.
"Bondholders and enterprises still can reach consensus on thepayment method for real estate if businesses pay both principal and interest,then offer a reasonable price for the converted property," Ducsuggested.
Analysts said that the payments in real estate meantswitching from financial transactions of borrowing and paying in cash tobuying and selling assets. Therefore, the transaction must satisfy regulations,including legally completing and meeting the criteria of an agreement to buyand sell.
Bondholders were recommended to learn about and choose reputableenterprises.
If the enterprise proposed exorbitant prices for the properties,bondholders should resolutely demand payment in cash. If the enterprise wasthree months behind on bond payments, bondholders could sue and ask the courtto initiate bankruptcy proceedings against it.
Experts also suggested that the Government should take effectivemeasures to solve the problems of real estate and bonds at their root, such astransparency or legal problems with projects. Only then could the bondholdersaccept the bond payment in real estate./.
VNA
