According to Fiinratings, in the current real estate market, businesses face difficulties to create new cash flow to fulfill debt obligations.

Fiinratings reported that in November, VND38.6 trillion worth of corporate bonds were issued, 90 percent of which were privately issued. This was the sixth consecutive month that the bond market saw the total value of issued bonds exceeding VND29 trillion.

In the first 11 months, the total value of bonds issued reached VND253 trillion, including VND228 trillion worth of privately issued bonds and VND25 trillion worth of bonds issued to the public.

However, the total value of bonds issued in the last 11 months was just equal to 80 percent of that in 2022 and much lower than the record high of VND782 trillion in 2021.

Commercial banks issued VND120 trillion worth of bonds, or 47.5 percent, while real estate firms issued 32.8 percent.

The interest rate of real estate bonds was 11.92 percent on average, and the bond term was 3.65 years. However, the interest rate range is wide, from 6 percent to 14.5 percent. 

FiinGroup said that the pressure on due debts in 2024 will be high, with bond issuers having to pay about VND376 trillion. 

Analysts estimate that the real estate bonds due in 2024 amount to VND155 trillion, or $6.3 billion, including VND122.2 trillion worth of bond original value and VND32.6 trillion worth of interest.

Amid the quiet real estate market, slow credit growth and real estate firms’ weak cash flow, many issuers may not be able to pay debts.

The rate of debt obligation violations among real estate firms is also high, at 22.7 percent, not including the value of corporate bonds renegotiated for the payment deadline extension under Decree 08.

In addition to bond issuance as a part of enterprises’ debt restructuring, FiinGroup believes that many real estate firms may continue to successfully issue bonds in 2024, when government initiated measures are deployed on a larger scale.

Meanwhile, many real estate firms have been more transparent in issuing information to the public and following current laws.

The government and Ministry of Finance (MOF) are considering extending privately-issued bond debt payment deadlines under Decree 08, and other solutions to settle the legal problems of real estate projects in order to recover the bond market.

Nguyen Quang Thuan, chair and CEO of FiinGroup, many times has warned of the pressure on bonds to mature in 2024 and said that this is a risk for the financial market.

According to Thuan, in the long term, to drive investors back to the market, there must be greater efforts from issuers, as well as reasonable policies and information transparency.

Prior to that, the Vietnam Bond Market Association (VBMA), reported that capital mobilization through bond issuance has improved, but pressure on mature bonds in the last two months of 2023 and in 2024 is still strong.

The Vietnam Realtors’ Association (VRA) said that pressure from mature bonds is burdening real estate firms. The total value of bonds which have been newly issued and redeemed is still low compared with the total value of due bonds.

The policies on extending bond debt payment deadlines can help bond issuers restructure their debts and give them more time to arrange capital, but debts remain unpaid and difficulties still exist.

According to the Hanoi Stock Exchange (HNX), as of October 2023, about 70 percent enterprises were listed as being slow in fulfilling their debt payment obligations with estimated debts of VND180 trillion, or 18 percent of total debts.

Regarding bonds related to Van Thinh Phat Group, Thuan said at a seminar in late November that it may take 3-5 years to deal with bad debts and settle the consequences.

Commenting about economic prospects in 2024, experts say they can see possible recovery, but also increased risks. A challenge is that the real estate market may remain frozen longer than predicted. Meanwhile, bond debts remain high and consumer demand remains weak.

Manh Ha