Many real estate businesses sell assets, use bank loans or offer shares to have money to pay debts and build projects.
Sell assets to quench thirst for capital
Up to now, Novaland Group has basically completed restructuring its loans and bond debts, but in the 2023 audit report, PwC Vietnam still noted Novaland's going concern assumption.
According to the independent auditor, the combined impact of cash flow shortages, short-term debt obligations maturing and constraints on the ability to raise capital in the financial market has increased short-term liquidity pressure on Novaland. In addition, as of the consolidated balance sheet date, Novaland breached certain commitments to loan and bond contracts.
Regarding this issue, Novaland said that the Company has received commitments from commercial banks to continue providing financial support to implement the construction of projects to ensure the progress of handing over houses in each phase to home buyers. Specifically, the banks will continue to disburse additional credit limits with an amount of VND 15,816 billion in the coming time.
In particular, Novaland plans to sell assets for approximately VND2,870 billion to pay off debts due within the time specified in the contract. At the same time, the Company also received letters of interest from investors regarding the sale of assets with an expected value of VND8,917 billion. The Company said it would complete the sale of these assets within the next 12 months.
Many businesses have made efforts to gradually or completely write off their bond debt to clean up their balance sheets before being eligible to access bank credit.
Similarly, LDG Investment Joint Stock Company is also implementing plans for development cooperation, project transfer, and share sale to pay off bond, bank and other debts.
Specifically, LDG will transfer the Bai But - Son Tra Tourist Area Project invested by Hai Duy Joint Stock Company (a subsidiary of LDG). The project has the commercial name LDG Grand Central, with a scale of 29 hectares and a total investment of more than VND4,600 billion.
At the same time, LDG also wants to transfer the Apartment Complex Project Lot C1 in Binh An Ward, Di An City, Binh Duong Province and other assets and projects.
Another typical case is Phat Dat Company. Mr. Nguyen Van Dat, Chairman of the Board of Directors of Phat Dat Company, assessed that the unexpected market shocks in the past 2 years have slowed down Phat Dat's growth rate significantly. Long-term plans that were carefully prepared also had to change. Many growth indicators had to be adjusted...
In this context, Phat Dat has resolutely implemented a strategy to restructure its investment and financial portfolio. In particular, it has accepted to sacrifice short-term interests such as selling some assets, transferring shares in some subsidiaries... to focus on more urgent issues.
Specifically, in 2022 - 2023, Phat Dat Company will sell two subsidiaries, Saigon - KL Real Estate Company (investor of Astral City Binh Duong Project) and Phat Dat Industrial Park Investment and Development Joint Stock Company (PDI).
As a result, Phat Dat has relieved financial pressure, especially successfully paying off all bonds on time and before the end of 2023, becoming a rare real estate enterprise with no bond debt in the context of extremely gloomy operations of the entire industry.
Capital pressure will gradually ease.
In a recent update report on the residential real estate industry, Vietnam Investment Credit Rating Joint Stock Company (VIS Rating) assessed that the debt repayment capacity of real estate enterprises remains weak, even when cash flow improves due to high leverage and large debt maturing in 2024. The debt/EBITDA ratio (measuring the company's ability to pay off arising debt) is 8.7 times in 2023, compared to 7 times in 2022 due to debt growth being higher than profit growth. The ratio of short-term debt/total debt in 2023 is up to 45%, the highest in the past 5 years.
In addition, about VND130 trillion of real estate bonds will mature in 2024 - the highest level in the past 5 years, posing recapitalization risks for investors. Investors with projects facing legal problems or implementing speculative projects may face risks of late payment of bond principal and interest and weak cash flow. Therefore, these are the companies that need recapitalization the most.
In fact, despite facing difficulties, especially in terms of capital, many businesses have made efforts to gradually or completely eliminate outstanding bond debt with the desire to clean up their balance sheets before being eligible to access bank credit and raise capital on the stock exchange.
For example, after restructuring to adapt to market fluctuations, Phat Dat is now focusing only on the residential real estate sector, with 6 major projects to launch on the market, with an estimated total revenue from these projects of about 40,000 billion VND.
To obtain operating capital, the Company plans to offer more than 134.3 million shares to existing shareholders at a price of VND10,000/share, with an issuance ratio of 5.5:1 and in the form of exercising rights. If successful, Phat Dat can collect more than VND1,340 billion. The entire amount collected will be used to implement real estate projects of the Company and its subsidiaries.
Similarly, DIC Corp is planning to issue 410 million shares to raise nearly VND6,500 billion. The company will use the raised money to supplement investment capital for the Cap Saint Jacques Complex Project Phase II and III at 169 - Thuy Van, (Ba Ria - Vung Tau province); Vi Thanh Commercial Residential Area Project (Hau Giang province); Nam Vinh Yen New Urban Area Project (Vinh Phuc province); Lam Ha Centre Point Residential Area Project in Lam Ha Ward (Phu Ly City, Ha Nam province).
According to VIS Rating, refinancing risks will be reduced in the coming time, thanks to improved access to bank credit and capital markets. Accordingly, the liquidity stress that investors have faced since the fourth quarter of 2022 has eased. Bank credit for real estate business has increased significantly, at 28% in 2023, and will continue to increase in 2024 to support investors' capital and liquidity needs.
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