Difficulty in rolling over bond debt, issuing businesses put bondholders at a disadvantage

Not only announcing late payment of principal and interest on bonds, a series of issuing enterprises also changed the terms and conditions of bonds in a way that is unfavorable to the owners.

A series of businesses have announced changes to bond terms and conditions in a direction that is unfavorable to bondholders.

Continuously late interest payments, changes in bond terms

Viet Tam Investment Joint Stock Company has just announced a one-year delay in payment for the VTICH2125 bond lot. Thus, in March 2024, nearly a dozen enterprises have announced a delay in payment of bond obligations, including: Mirae Asset One Member Co., Ltd. (Vietnam), Novaland Group, Neo Floor Joint Stock Company, Phu Quoc Tourism Investment and Development Joint Stock Company; Nam Song Hau Petroleum Investment and Trading Joint Stock Company; Cho Long Wind Power Joint Stock Company; Unity Real Estate Investment Co., Ltd., Ho Chi Minh City Commercial Services Joint Stock Company, etc.

Previously, in January 2024, 7 enterprises announced late payments of principal and interest on bonds with a total value of nearly VND 8,500 billion. In February 2024, 7 enterprises also announced late payments of principal and interest in the month, with a total value of about VND 6,213 billion (including interest and remaining outstanding debt of bonds), not including bond codes with extended payment periods for interest, principal or early bond buyback periods.

Not only announcing late payment of principal and interest on bonds, since the beginning of the year, a series of businesses have also announced changes in bond terms and conditions with many provisions unfavorable to bondholders.

For example, Mirae Asset One Member Co., Ltd. (Vietnam) changed its terms and conditions in the direction that the issuing organization can stop paying interest or waive interest (previously stipulated that accumulated interest would be transferred to the next fiscal year) if the business results were unprofitable. In addition, the Company has the right to extend the bond without consulting the bondholders (instead of having to receive the bondholders' approval).

Since the beginning of the year, a series of other enterprises have also announced changes in bond terms and conditions in a direction that is unfavorable to bondholders, such as Ninh Thuan Energy Investment and Development Company Limited, Golden Hill Investment Joint Stock Company, Trung Nam Solar Power Joint Stock Company, Tan Hoan Cau Ben Tre Joint Stock Company, Dai Hung Real Estate Joint Stock Company; Signo Land Joint Stock Company; Nam Song Hau Petroleum Investment Joint Stock Company; Nova Final Solution Joint Stock Company, BVB Joint Stock Company... Most of the companies have changed in the direction of reducing the commitment repurchase progress, extending bonds by 12-24 months, reducing interest rates, waiving late payment interest penalties...

More support needed for bond market

In the first 3 months of this year, corporate bond issuance decreased by about 50% compared to the same period last year, while the pressure to mobilize capital to repay maturing bonds increased. Excluding the amount of bonds bought back before maturity in the first quarter of 2024, in the remaining 3 quarters, the amount of corporate bonds maturing reached more than 211,000 billion VND - according to data from the Bond Market Association. The pressure on bond maturity is forcing many issuing businesses to extend, postpone debts, and change the terms of bond repayment.

Bonds are one of the four most important sources of capital for real estate businesses.

Mr. Nguyen Quoc Hiep, Chairman of Vietnam Association of Construction Contractors

Currently, the pressure to mature bonds of real estate and construction enterprises is very high. Although banks have excess money, it is very difficult for enterprises to access it due to strict lending conditions and high lending interest rates. Only when the legal and capital access difficulties are resolved and corporate bonds are issued, will the real estate market recover. Currently, bonds are one of the four most important sources of capital for real estate enterprises, along with bank credit, capital mobilized from investors and equity.

However, according to some experts, this year, the amount of overdue bonds will decrease compared to last year, thanks to the efforts to buy back early that have been taking place in recent years. Mr. Nguyen Dinh Duy, Director of Analysis, Rating and Research Division (VIS Ratings), said that the amount of overdue corporate bonds in 2023 was up to nearly VND190,000 billion, but this year it was only about VND40,000 billion, belonging to 35 issuing enterprises. The amount of high-risk bonds will be concentrated in the fourth quarter of 2024.

In the context of more difficult bond issuance, some businesses are forced to change their capital mobilization plans from bonds to bank loans or issue stocks, convert bonds to stocks... to pay off debts.

WiGroup Company analysts believe that the slow repayment of bonds by real estate enterprises is a real concern. This not only affects enterprises, but can also have a chain effect, causing investors to lose confidence. This can also lead to credit tightening, making access to capital more difficult for enterprises, especially small and medium enterprises.

The gloomy bond issuance in the first quarter of 2024 despite the low interest rate environment was due to the lack of a mechanism to mobilize the participation of institutional investors, while the individual investor base was narrowed due to the impact of Decree 65/2022/ND-CP amending Decree 153/2020/ND-CP regulating the offering and trading of individual corporate bonds in the domestic market and the offering of corporate bonds to the international market) from the beginning of 2024.

Mr. Nguyen Quang Thuan, General Director of Fiin Ratings, said that the recovery of real estate bonds depends largely on the legal clearance of projects, so that these projects can access capital, implement and open for sale. In addition, there needs to be a breakthrough solution to open up the institutional investor base and promote the bond issuance channel to the public.

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