Corporate bonds warm up

Banking, real estate lead

According to data from the Vietnam Bond Market Association (VBMA), the corporate bond market is bustling again with the total value of new issuance reaching an impressive number. From the beginning of the year to the end of August 2024, there were 227 private issuances worth VND 215,583 billion and 13 public issuances worth VND 22,773 billion. In August alone, a total of nearly VND 49,000 billion was successfully mobilized through corporate bonds. Banks are leading the race to mobilize capital with up to VND 42,000 billion in bonds issued. In the "runner-up" position in capital mobilization is the real estate group with nearly VND 5,000 billion, through 7 issuances. In the updated report on Vietnam's economic situation recently published by the World Bank (WB), the WB assessed that the corporate bond market is showing signs of recovery. Issuance volume increased 2.5 times in the first half of 2024 compared to the same period in 2023.

Corporate bonds, in which banking and real estate groups always lead in issuance

For example, MB Bank successfully issued 10,000 billion VND, Vietinbank issued 5,000 billion VND, SHB issued 3,000 billion VND, Agribank issued 10,000 billion VND... Real estate bonds also recovered compared to the same period last year. Recently, the Board of Directors of Kinh Bac Urban Development Corporation (code KBC) approved the plan to issue individual bonds in the third quarter with a maximum value of 1,000 billion VND. These are non-convertible bonds, without warrants, with collateral; 2-year term with a fixed interest rate of 10.5%/year.

The company said the money raised will be used to restructure the debts of Kinh Bac and its member units. Becamex IDC also issued two bonds in August with a total value of VND500 billion. Big companies such as Vinhomes, Sun Group, Nam Long, Khang Dien... have also successfully issued bonds. MBS Research forecasts that corporate bond issuance activities will be more active in the fourth quarter when the real estate market begins to warm up and production and business expansion activities are more active with the recovery of the economy.

Vietnam Investment Credit Rating Joint Stock Company (VIS Rating) forecasts: In the second half of 2024, the banking group will continue to account for the majority of the total value of new corporate bond issuance. The reason is that banks need to increase medium and long-term capital mobilization to meet capital adequacy ratios (CAR), especially in the context of accelerating credit growth with the target of increasing by 15% for the whole industry in 2024.

For real estate businesses, in the first half of 2024, bond issuance activities recovered at a slow pace since the crisis of delayed principal and interest payments in 2022. While the capital mobilization demand of real estate businesses is still very large. However, in the short term, businesses in this industry are prioritizing credit channels from banks. Outstanding loans for real estate business activities of banks in the first 6 months of 2024 increased by 13.1%, much higher than the general credit growth momentum.

Additional funding for project implementation

Not only is the corporate bond market warming up, the positive signal is also shown in the fact that many businesses have successfully negotiated payment extensions. This has helped them have more time and more capital to implement projects.

The Manor Apartment

For example, at the end of 2023, Phat Dat Real Estate Development Joint Stock Company (code PDR) announced the full payment of principal and interest on bonds issued in 2021 and 2022. An Gia Real Estate Investment and Development Joint Stock Company (code AGG) recently announced the final settlement of the last bond lot worth VND 300 billion in May, thereby bringing the outstanding bond balance to 0. Similarly, Kinh Bac Urban Development Corporation (code KBC) also officially brought the outstanding bond balance to VND 0 from the end of 2023.

According to Mr. Nguyen Van Dat, Chairman of the Board of Directors of Phat Dat Company, only after going through a crisis can we see that cash flow is blood. Therefore, in the coming period, Phat Dat will focus on many things but cash flow must be prioritized. Especially focusing on sales, legal, construction to turn internal strength into cash flow, not allowing any crisis to continue to happen. The current advantage is that the domestic real estate market is warming up, capital channels such as TPDN are also growing well, helping businesses mobilize capital to invest in projects, have products to launch on the market, thereby having cash flow.

Mr. Nguyen Dinh Duy, Director, Senior Analyst at VIS Rating, said that access to capital (including bank credit and bond mobilization) for real estate businesses will be easier in the second half of the year. Especially when 3 new laws related to real estate take effect from August 1, 2024, which will help investors solve problems in determining land prices and land use rights, thereby accessing financial resources for new project development. Bond capital mobilization recovers, real estate business credit is estimated to increase by 16 - 18% in 2024. In addition, many listed real estate businesses have announced plans to increase equity this year, with an estimated VND 26,000 billion in new equity capital being mobilized for project development or to repay maturing debts. All of these factors will help investors reduce liquidity difficulties due to large debt maturing pressure in 2024 and 2025.

Phan Dung Khanh, Investment Consulting Director of Maybank Investment Bank and founding member of the Vietnam Association of Financial Managers, commented: The most quiet period of the corporate bond market has passed and now the issuance value has increased, liquidity is available. Currently, the number of enterprises with delayed interest payments has gradually decreased, becoming fewer and fewer. Another phenomenon is that the bond mobilization interest rates of real estate enterprises used to be among the highest, but are now on a downward trend. This proves that capital sources have become less stressful. "If in the past the bond interest rates of banking and real estate finance were terribly different, now they have come closer together. Currently, enterprises have also negotiated with bondholders to extend the bond. This gives enterprises more time to arrange financial resources or restructure debt. Instead of declaring insolvency, they can negotiate with investors on an extension to continue paying debts in the future," said Mr. Phan Dung Khanh.

Experts share the view that the warming signal of the corporate bond market, especially in the real estate sector, comes from a number of positive factors that have helped restore investor confidence. At the same time, it helps businesses restructure their debts and continue to develop projects, thereby improving their ability to repay debt to bondholders. Some large real estate companies have also had the opportunity to restructure their operations, downsize their apparatus or accelerate the completion of projects that have been and are being implemented, in order to improve cash flow and increase the ability to pay bonds. The demand for real estate, especially housing, is still increasing in some areas, which will continue to create conditions for investors to have the opportunity to recover capital from projects, thereby improving financial health, bringing the market into a more sustainable development phase.

According to VIS Rating, the size of the corporate bond market is currently about VND1.2 million billion at par value, equivalent to nearly 11% of nominal GDP in 2023. According to the Government's orientation in the Stock Market Development Strategy to 2030, the target size of the corporate bond market is 25% of GDP in 2025 and 30% of GDP in 2030. It is estimated that to achieve this goal, the amount of new issuance must reach VND800,000 - 900,000 billion each year. The message from the Government shows that, despite recent problems, corporate bonds are still oriented by management agencies as an important capital mobilization channel for the economy.

Source: https://thanhnien.vn/trai-phieu-doanh-nghiep-am-lai-18524100916444102.htm