Real estate sector sees surge in corporate bond sales to restructure debt

Construction of a building by Viva Land belonging to Vạn Thịnh Phát Group halted at the end of last year. The real estate sector accounts for the highest outstanding bond value at VNĐ396.3 trillion. — VNS Photo Bồ Xuân Hiệp

HCM CITY — The real estate sector has witnessed a surge in corporate bond issuances worth a total of VNĐ30 trillion (US$1.22 billion) in the third quarter of 2023, a move aimed at debt restructuring rather than capital raising.

Interest rates for real estate bonds in the third quarter were between 12-15 per cent per year, higher than the overall market average of around 9 per cent per year.

Real estate firms accounted for 32.1 per cent of the total market, with bond issuance reaching its highest level since the beginning of 2023, according to a report by the Vietnam Bond Market Association.

Capitaland Tower Company Limited emerged as a major player, issuing over VNĐ12.2 trillion worth of bonds for over 40 per cent of the total amount, according to a report by VNDirect.

Other major issuers included Lan Việt Real Estate Company Limited with VNĐ4.1 trillion, BIM Land with VNĐ2.33 trillion, and Tân Liên Phát Tân Cảng Logistics and Real Estate JSC with VNĐ2 trillion.

Vinhomes JSC, an affiliate of Vingroup, Việt Nam’s largest property developer, announced plans to issue bonds worth up to VNĐ5 trillion for debt restructuring purposes.

In the first quarter, the market witnessed sales value of over VNĐ24 trillion due to a Government decree in March that allows issuers to extend bond repayments by up to two years and use other assets for bond repayment.

However, the issuance value sharply declined to VNĐ4 trillion in the second quarter. No real estate company issued bonds in April, reflecting a sluggish market.

The sluggish property market and reduced cash flows have forced many real estate developers to negotiate with bondholders to extend bond redemption dates.

By October 3, more than VNĐ95.2 trillion worth of bond term extensions had been agreed upon with bondholders, according to a report by VNDirect.

Key players in the real estate market, such as Sovico, Novaland, Hưng Thịnh, and Bamboo Capital, are all seeking extensions for multiple bond tranches.

The arrangements allow companies to restructure their cash flow and debt repayment capabilities, reducing the pressure of due dates in the last quarter of the year, experts noted.

According to the report by VNDirect, at least 50 issuers, mainly property developers, are seeking extensions for bond maturity dates for the total amount of over VNĐ95.2 trillion.

Late interest and principal payments on bonds are already a major issue, with over 69 companies reported as delinquent on payments of VNĐ176.1 trillion, or 18 per cent of the entire market, with the real estate sector constituting the majority of that amount, according to the Vietnam Bond Market Association.

The corporate bond market has experienced a boom in recent years, driven by increased capital demand from property developers and banks.

However, the market took a sudden turn in October last year following the arrest of Trương Mỹ Lan, chairwoman of Vạn Thịnh Phát Group, on charges of bond market fraud.

According to a report by S&P Global Ratings, the real estate sector holds the largest outstanding bond value at VNĐ396.3 trillion, or 33.8 per cent of total outstanding bonds.