How does Khang Dien House manage its debts of over 3,000 billion VND?

Debt due over 3,000 billion VND

The consolidated financial report for the fourth quarter of 2023 of Khang Dien House Investment and Trading Joint Stock Company (Stock code: KDH) recorded that total liabilities as of December 31, 2023 increased by 12% to nearly VND 10,890 billion. Of which, loans were recorded at VND 6,345 billion, down 6% over the same period last year.

Khang Dien House has 1,100 billion VND in unsecured bond debt with an interest rate of 12%/year; the rest is secured bank loans with interest rates ranging from 10.9 - 12.6% at OCB (outstanding debt of over 4,100 billion VND) and 10.5%/year at VietinBank.

Notably, the company has a long-term loan due for payment of VND377 billion. According to the explanation, KDH has a loan of nearly VND500 billion at Orient Commercial Joint Stock Bank (OCB) - District 4 Branch, the principal repayment period is from January 25, 2024 to April 6, 2025 and a loan of nearly VND44 billion at OCB, the principal repayment period is March 9, 2024.

KDH recorded a long-term debt due for payment of 377 billion VND. Screenshot of KDH's consolidated financial statements for the fourth quarter of 2023

Meanwhile, KDH's operating cash flow at the end of 2023 continued to be negative for the third consecutive year with a negative figure of VND 1,556 billion (negative VND 1,047 billion in 2022), mostly due to inventories and receivables. At the same time, financial cash flow also recorded a negative of more than VND 293 billion (positive VND 3,231 billion in 2022) because the company paid off the principal of nearly VND 4,520 billion, while the borrowed money was less than VND 4,100 billion.

In terms of business activities, in the fourth quarter of 2023, Nha Khang Dien recorded net revenue of VND 469 billion, down 62% over the same period, and after-tax profit of VND 63 billion, down 42.7% over the same period.

Accumulated in 2023, Nha Khang Dien recorded net revenue of VND 2,093 billion, down 28.1% over the same period, after-tax profit recorded VND 730 billion, down 32.5% over the same period last year.

In addition to the debt due to be paid of 377 billion VND at KDH, recent information revealed that a subsidiary 100% owned by Khang Dien, Khang Phuc House Investment and Trading Company Limited, has 3 bank loans with a total value of 2,700 billion VND that are also due to be paid soon.

How does Khang Dien House manage?

To pay the above debts, recently, Nha Khang Dien announced that the company is collecting shareholders' opinions in writing about offering shares and raising capital to pay debts. The deadline for completing the collection of shareholders' opinions is 2:00 p.m. on March 6.

Accordingly, Khang Dien House plans to offer more than 100 million shares in 2024 to 20 professional securities investors (including 14 organizations such as funds, securities companies, banks, real estate and 6 individuals).

The expected offering price is VND 27,250/share, a 12% discount compared to the average closing price of the 30 consecutive trading sessions before February 23, 2024. The newly offered shares will be subject to transfer restrictions for one year from the closing date of the offering.

KDH plans to use more than VND3,000 billion raised to pay off due debts. Screenshot of KDH's plan to offer shares to increase charter capital in 2024.

It is estimated that the amount of money raised from the offering is more than 3,000 billion VND. Khang Dien House plans to use 300 billion VND to pay off loans under credit contract No. 0116/2021/HDTD-OCB-DN; and 2,700 billion VND to invest in additional capital contribution to Khang Phuc House Investment and Trading Company Limited so that this unit can pay off 3 bank loans with a total value of 2,700 billion VND.

The disbursement time for payment is expected in 2024 and 2025. If the issuance is successful, KDH's charter capital is expected to increase from VND 7,993.1 billion to VND 9,094 billion.

If some loans are paid before the end of the offering, Khang Dien will adjust the plan and flexibly arrange suitable plans or add to the business capital.

In case the shares are not fully purchased, resulting in the amount of money raised from the offering not being as expected, Khang Dien will use the mobilized capital in order of priority, rebalance the capital sources and flexibly use other capital sources to come up with a suitable solution.

Also related to the borrowing activities of Khang Phuc House, recently, Khang Dien House has committed to guarantee the entire debt repayment obligation in full and on time for the loan of 4,270 billion VND of Khang Phuc House at Vietinbank - Hanoi Branch.

Previously, in October 2022, Khang Dien House also approved a plan to guarantee Khang Phuc House Investment and Trading Company Limited a loan of no more than VND 1,220 billion at Orient Commercial Joint Stock Bank (OCB) - District 4 branch to pay land rent fees of up to VND 420 billion according to the land rent payment notice of the State agency and pay up to VND 800 billion for investment and construction costs of technical infrastructure for the Le Minh Xuan Industrial Park (IP) expansion project, phase 1.

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