Businesses continuously ask for bond extensions, should they go bankrupt or not?

Need to improve and enhance the effectiveness of the Bankruptcy Law

Speaking at the discussion session within the framework of the workshop "Developing the corporate bond market towards professionalism and sustainability" on the morning of August 16, Dr. Le Xuan Nghia - Member of the National Financial and Monetary Policy Advisory Council expressed his opinion: Many issuing organizations have been unable to pay the principal and interest of bonds in the past and have continuously requested debt extensions, the most basic solution is to let the enterprises go bankrupt according to the principle of "if it's broken, cut it off".

Mr. Le Xuan Nghia proposed that businesses that cannot pay principal and interest on bonds and have ineffective business operations go bankrupt.

"Any business that cannot pay its debts, its situation is so bad that it should go bankrupt and investors need to learn to accept risks and losses," said Mr. Nghia.

Responding to the above opinion, Dr. Can Van Luc - Chief Economist of BIDV and Member of the National Financial and Monetary Policy Advisory Council said that the phenomenon of enterprises going bankrupt is unlikely to happen because the most difficult time of the market has passed, now there are many synchronous solutions that can solve the root of the problem.

"In Vietnam, it is difficult for normal businesses to go bankrupt, but it is even more difficult for businesses with bond debt to go bankrupt because the bond debt is still there. How can we solve this problem?", Mr. Luc said.

Adding more about the story of real estate corporate bond maturity, Mr. Luc said that since Decree 08 allowing debt deferral and postponement negotiations, many businesses have overcome the most difficult period.

Basically, 60% of businesses have extended their terms for 2 years (peak June 2025), businesses proactively buy back bonds according to issuance conditions and start issuing again to reduce capital pressure.

Dr. Can Van Luc - Chief Economist of BIDV and Member of the National Monetary and Financial Policy Advisory Council.

In addition, the real estate market warms up, businesses are willing to sell assets to set aside a portion to pay off debt.

Not to mention in the current market context, real estate businesses do not need to discount products by 40 - 50% like before, a discount of about 10% has already sold.

Also discussing the issue of whether or not to let businesses go bankrupt, Mr. Do Ngoc Quynh - General Secretary of the Corporate Bond Market Association said that the State Securities Commission, the management agency, should recognize the difficulties to both create favorable conditions for businesses and maintain the sustainability of the market.

"It is very important that we improve and enhance the effectiveness of the Bankruptcy Law. All development is based on the law of elimination, otherwise it will be like "a body that cannot digest food will have many diseases". With businesses, we agree to allow debt extension, but the mechanism and negotiation methods must be substantial and have elimination," said Mr. Quynh.

Giving an example in the world, the General Secretary of the Corporate Bond Market Association said that in many countries, when a business becomes insolvent, it must be made public, a creditors' council must meet, or they hire an independent organization to assess the business's difficulties to assess whether it should be protected from bankruptcy or allowed to go bankrupt.

Mr. Do Ngoc Quynh - General Secretary of the Corporate Bond Market Association.

Meanwhile, in Vietnam, there is a phenomenon that although the negotiation mechanism is extended, individual investors do not have the capacity to evaluate the issued bonds, so when the enterprise requests an extension, individual investors fall into a state of panic, many individual investors are forced to accept the extension negotiation for fear of losing all their investment money.

On the other hand, investors currently do not have an answer to the question "If they do not accept, how can they sue the business?".

Therefore, Mr. Quynh believes that it is also necessary to recognize that if we continue to extend the term with businesses that cannot recover, the market situation may become even worse.

Need to define what a professional stock investor is

Regarding the above arguments, Mr. Nguyen Anh Minh - Deputy Head of Bond Registration Management Department, Vietnam Securities Depository and Clearing Corporation (VSD) expressed his opinion that the root of the problem lies in the role of professional individual investors.

Current reality shows that investors are known as professionals but the identification is not strict, just needing a confirmation from a securities company to be considered a professional investor brings many risks.

Meanwhile, businesses issuing private placements to individuals mostly only care about offering as much as possible and do not care whether investors have enough knowledge or judgment about the business.

"Usually, investors buy based on the advice of brokers or relatives. This leads to many consequences when the issuer cannot guarantee the ability to repay the debt, and individual investors suffer losses," Mr. Minh commented.

Mr. Nguyen Anh Minh - Deputy Head of VSD Bond Registration Management Board.

Therefore, the expert believes that first of all, it is necessary to improve the knowledge of individual investors or individual investors can authorize the agency to learn more about bonds and take responsibility for the products they offer for investors to buy.

In addition, Mr. Hoang Van Thu - Vice Chairman of the State Securities Commission said that it is urgent to adjust the standards of professional investors in the Securities Law 2019.

On the other hand, it may be necessary to determine the criteria for investors participating in the stock market based not only on transaction value and trading experience, but also on their understanding of business operations.

From another perspective, Mr. Phan Duc Hieu - Standing Member of the National Assembly's Economic Committee said that when it comes to the bond market, it is not 100% the fault of the market and related regulations, but also external risks.

Mr. Hieu analyzed that when a bond is issued with a good business plan, investors trust this plan but market risks cause the plan to not be as expected, this is a significant cause.

Or if the market changes and affects the business scenario, this may indicate that the bond market is risky and not completely safe.

Mr. Phan Duc Hieu - Standing Member of the Economic Committee of the National Assembly.

However, Mr. Hieu expressed concern that too much policy intervention would create rigidity in the market and create barriers.

Especially regarding the professionalism of investors, the leader said the law cannot intervene in this issue.

"Individual professionalism of investors is important, self-awareness in making decisions to buy and sell bonds, for their own benefit, to become more professional," Mr. Hieu said.

Source: https://www.nguoiduatin.vn/doanh-nghiep-lien-tiep-xin-gia-han-trai-phieu-co-nen-cho-pha-san-hay-khong-204240816132615313.htm