Real estate firms aggressively restructuring bond debt

Real estate enterprises are facing significant debt maturities of nearly 59 trillion VND (2.3 billion USD) and a rapidly rising delinquency rate in the sector.

Around 140 trillion VND worth of bonds will mature in the second half. (Photo: VNA)
Around 140 trillion VND worth of bonds will mature in the second half. (Photo: VNA)

Hanoi (VNS/VNA) - Real estate enterprises are facing significant debt maturities of nearly 59 trillion VND (2.3 billion USD) and a rapidly rising delinquency rate in the sector.

From the start of 2024 to July 5, the market saw 133 private placements and ten bond public offerings, totalling over 140 trillion VND. 65.6% of this value was from the banking sector, while real estate bonds accounted for only 24.6%, or over 34.5 trillion VND.

Real estate bond issuance activity picked up in June, with notable offerings from Vinhomes (2.5 trillion VND), Becamex (800 billion VND), Thien Ha - Bang Duong Construction Investment Company (600 billion VND) and Nam Long Group (550 billion VND).

While real estate bond issuance value has recovered year-on-year, its proportion of total issuances has dropped sharply - from nearly 55% in the first half of 2023 to just 25% in the first half of 2024.

This is concerning, as real estate enterprises are facing significant debt maturities and a rapidly rising delinquency rate in the sector.

In the first week of July, nine companies announced delays in paying the principal and interest on their bonds, along with changes to the bond terms - primarily extending the maturity by 12-24 months.

These companies were mostly from the real estate sector, including Novaland, Gia Duc Real Estate Company, Vinh Xuan Real Estate Company and Ngoc Minh Real Estate and Investment Company.

This followed a similar trend in June, when numerous real estate enterprises had announced delays in bond payments or requested to restructure their bonds.

In the latter half of 2024, it is estimated that around 140 trillion VND worth of bonds will mature, with the majority (nearly 59 trillion VND, accounting for 42%) being real estate bonds. This group of real estate bonds is facing the highest debt repayment pressures.

Data from FiinGroup showed that as of May, the delinquency rate on bonds, including corporate bonds that have been restructured, or had their maturity extended, was close to 18%.

For the non-bank corporate bond segment specifically, the rate was nearly 26%. The total value of corporate bonds that are problematic was around 215 trillion VND.

The real estate sector has the largest share of delinquent bonds, with the delinquency rate as high as 42.5%. However, encouragingly, in the first five months, the rate of problematic corporate bonds has been slowing compared to 2023.

In the first half of this year, real estate companies have been actively raising funds by issuing bonds with average yields of 9-12% per annum. These bond issuances have mainly involved large, reputable, real estate developers such as Vinhomes, Nam Long and Khang Dien.

For the high-risk group of real estate companies facing financial difficulties, the bond yields can reach as high as 20-30%, or even up to 50%. These high-yield bonds are typically associated with low-liquidity.

"Real estate companies have faced liquidity challenges since the second half of 2023. As a result, their corporate bonds are being traded with yields as high as 20-25%. These high-yield bonds are typically issued by companies struggling with project execution," analysts from FiinGroup said.

"These companies will be under significant financial pressure over the next 12-18 months and face obstacles in refinancing or raising new capital. This reflects the risk appetite of investors purchasing these high-yield bonds."

The willingness to raise funds through high-interest bonds also suggests these companies are finding it difficult to access bank credit, especially without sufficient collateral or debt repayment capability.

Nevertheless, Nguyen Dinh Duy, a senior analyst at the Vietnam Investor Service (VIS Rating), believes real estate firms will find it easier to access capital in the second half of 2024.

New real estate laws effective August 1, 2024 will help investors resolve land valuation and usage issues, allowing them to secure financing for new projects.

Bond issuances are expected to recover, and real estate lending is forecast to grow 16-18% in 2024. Many listed developers also plan to raise around 26 trillion VND in new equity this year.

Duy said that these factors will help alleviate liquidity challenges for investors facing heavy debt maturities in 2024-2025./.

VNA

See more

VinFast showcases its complete range of electric vehicles at the BIMS 2024 exhibition. (Photo: VNA)

Vietnamese products rise from villages to global markets

Many Vietnamese brands like VinFast, Hoa Phat, Viettel, Vinamilk, and GrowMax have steadily increased their market share at home, expanded their export markets, and built production and value chains, all while contributing to the country’s economic growth.

At the forum (Photo: baoquocte.vn)

Vietnam – a land of opportunities for Nordic firms

Ole Linnet Juul, Senior Chief Advisor of the Confederation of Danish Industry, commended Vietnam’s recent strides, particularly in institutional reforms, technological advancements, innovation, and digital transformation.

Apartments building in HCM City. 2025 is predicted to be a crucial foundation year for the real estate sector in HCM City. (Photo baoxaydung.com.vn)

HCM City real-estate market predicted to recover this year

2025 will serve as a crucial foundation year for the real estate sector in Ho Chi Minh City, marking the path towards a full recovery by 2026 after facing challenges caused by COVID-19 and economic recession, experts predicted.

The Commission for Management of State Capital at Enterprises transfers the rights and responsibilities of the agency representing state capital ownership to the Ministry of Finance. (Photo: VNA)

State capital ownership rights transferred to Ministry of Finance

After merging with the Ministry of Planning and Investment and receiving 18 state-owned groups and corporations from the Commission for Management of State Capital at Enterprises (CMSC), the Ministry of Finance acts as the 'backbone' of the economy, managing all financial resources from public investment and resources from these groups and corporations, to foreign loans.

At the ceremony on February 28 to officially transfer MobiFone Telecommunications Corporation from the commission to the Ministry of Public Security. (Photo: VNA)

State-owned MobiFone now under Ministry of Public Security

MobiFone's profit before tax in 2024 was estimated at over 2 trillion VND (78.23 million USD), exceeding its annual target by 20.6%. The corporation's digital services sector has witnessed high growth rates across many products and services, including MobiFone Meet (1,050%), Cloud (312%), mobiAgri (49%), and MobiFone Invoice (58%).

Investors monitor the development of the stock market at MB Securities JSC (Photo: VNA)

Vietnam pushes to elevate stock market

Vietnam will create favourable conditions for the stock market to develop more breakthrough and innovative products, enhancing the quality of market offerings and attracting more investors.