"Heavy burden" with real estate bond debt

The debt repayment pressure of real estate businesses issuing bonds is still quite large, and many businesses are even at risk of bankruptcy.

Recently announced information by the Hanoi Stock Exchange (HNX) shows that Nam Land Company Limited is circulating the bond lot NALCH2124001, with a total issuance value of VND 900 billion, a term of 3 years, interest rate of 10.3%/year, expected to mature on July 13, 2024.

In 2023, Nam Land has 4 bond interest payments. In the first payment (January 13), the Company had to pay 25 billion VND, but could not arrange finance. It was not until February 28, 2023 that the Company was able to arrange cash flow and pay interest.

Meanwhile, in the second installment (April 12, 2023), the Company had to pay VND26 billion in interest, but could only arrange 50%, the remaining 50% was "delayed". In the third and fourth installments, Nam Land had to pay more than VND54 billion in interest, but had not yet arranged the finances.

Explaining the inability to pay bond interest on time, Nam Land representative said that a series of legal problems caused the Shizen Home Project to be continuously refused to open for sale future housing, leading to loss of revenue to pay bond principal and interest as committed to bondholders. In addition, consecutive business losses in the past 2 years have also significantly affected the Company's cash flow.

Not only Nam Land, but many other large real estate companies are also facing debt repayment pressure from bonds. The corporate bond market report of Vietnam Investment Credit Rating Joint Stock Company (VIS Rating) shows that as of the end of April 2024, the rate of overdue bonds in the whole market was at 15%, unchanged from March 2024.

Notably, more than half of the bonds with delayed principal or interest payments come from the residential real estate sector, with the rate of delayed principal and interest payments in this sector being 30%.

Khai Hoan Land Group has just approved the extension of the term of bond code KHGH2123001 to April 5, 2025, adjusting the interest rate to 12%/year. Thus, after extending the term for 1 year in 2023, Khai Hoan Land continues to extend the bond term for another year.

Or in the case of Unity Real Estate Investment Company Limited, as of December 31, 2023, the Company's equity reached VND 2,916.1 billion, a slight decrease compared to VND 3,089.6 billion in 2022. The debt/equity ratio decreased slightly from 1.4 times in 2022 to 1.37 times in 2023, corresponding to liabilities reaching more than VND 3,995 billion.

Bond debt to equity increased from 0.32 times in 2022 to 0.38 times in 2023, equivalent to VND 1,108.1 billion in bond debt. Unity Company extended its loss streak when in 2023 it recorded a negative after-tax profit of VND 173.5 billion (in 2022, the after-tax loss was VND 124.2 billion).

In May 2024, according to VIS Rating data, 28 bond codes belonging to 24 issuers worth VND 15,000 billion will mature. Of which, VIS Rating estimates that about VND 4,700 billion, equivalent to 30%, is at risk of late payment of debt due in May 2024.

Of the VND4,700 billion worth of high-risk bonds, about VND4,000 billion issued by three companies have delayed interest payments in 2023. VIS Rating assessed that these issuers are highly likely to delay principal payments due to weak cash flow and depleted cash resources. The remaining VND700 billion of high-risk bonds, delayed for the first time, are mostly issued by issuers in the residential real estate sector.

Commenting on the debt repayment ability of real estate enterprises when the amount of real estate bonds maturing this year is at the highest level in the past 5 years, Mr. Duong Duc Hieu, Director of analysis and credit rating, non-financial enterprise segment of VIS Rating, said that the debt repayment ability of real estate enterprises is still weak.

One point to note is that the level of differentiation in debt repayment capacity will increasingly widen. For businesses with projects focusing on the segment that meets real demand in big cities such as Hanoi and Ho Chi Minh City, sales activities will still be quite good and will recover in 2024. These businesses will have significantly better resources and higher debt repayment capacity.

On the contrary, some businesses remain in a difficult situation because they previously focused on highly speculative projects. In 2024, demand for this segment will remain low, so the debt repayment capacity of this group will be weak.

“Real estate businesses have three main capital mobilization channels: bank loans, bond issuance and equity issuance. In 2024, VIS Rating assesses that the ability to access new capital for the entire real estate group will be better. Each business will prioritize choosing different capital mobilization methods, but the cheapest form of capital mobilization for businesses is equity issuance and this will be the channel with the strongest growth this year,” said Mr. Hieu.

Source: https://baodautu.vn/nang-ganh-voi-khoan-no-trai-phieu-bat-dong-san-d215926.html