The report found that the total amount of corporate bonds issued in 2021 was VND639.766 trillion, an increase of 38.8 percent over 2020 (VND466.826 trillion), mostly through private offerings, valued at VND605.52 trillion, up by 38.8 percent over 2020. 

The total amount of corporate bonds offered to the public was VND34.146 trillion in 2021, up by 11.8 percent.

The corporate bond market was estimated to be equal to 18.2 percent of GDP as of the end of 2021, increasing by 42.4 percent compared with late 2020 (17.11 percent of GDP).

Regarding international bond issuance, six enterprises in 2021 issued bonds in the international market with total value of $1.74 billion. Of these, four real estate firms issued $1.15 billion worth of bonds, which accounted for 66.1 percent of total bonds issued. The other issuers were trade and service companies and credit institutions which accounted for 24.4 percent and 9.5 percent, respectively.

The average privately placed bond interest rate in 2021 was 7.94 percent, a decrease of 1.4 percent compared with 2020 and lower by 1-2 percent compared with average medium- and long-term loans offered by credit institutions

In 2021, privately offered bonds with mortgaged assets accounted for 49.7 percent, while unsecured bonds accounted for 50.3 percent. As for public offered bonds, most of the bonds were unsecured, which accounted for 99 percent of total bonds issued.

The bonds with no mortgaged assets were mostly ones issued by commercial banks and securities companies, which accounted for 77.7 percent of total unsecured privately offered bonds.

As for bonds issued by real estate and construction firms, 88.2 percent of total bonds issued were secured or guaranteed for payment, while 11.8 percent of bonds were unsecured.

The mortgaged assets of the bonds issued by real estate firms were mostly real estate projects (57.84 percent of total issued bonds), or secured by shares (23.95 percent), while the bonds secured by both real estate and shares accounted for 1.37 percent. The bonds secured by other assets accounted for 8.67 percent.

As such, secured bonds accounted for a high proportion of total issued bonds, but the quality of mortgaged assets is problematic. They are mostly projects and real estate to be created in the future, or shares of real estate firms. If the real estate market falls, the value of the secured assets won’t be high enough to pay the principal and interest of the bonds.

Warning

In its report, MOF focused on the investors who bought privately offered bonds. The proportion of individual investors buying the bonds in 2021 saw a sharp decrease compared with 2020 in the primary market. They accounted for up to 19 percent of total issued value in the secondary market. 

To lure more investors, issuers used many tricks to circumvent the laws. Individual investors were certified as professional investors (valid within one year) by forward contracts to buy listed bonds or securities for 2-4 days.

Second, individual investors used margin loans to prove that their securities portfolios have value of over VND2 billion, but the real figure was lower.

Third, individual investors did not buy bonds in their names but they signed contracts with securities companies, commercial banks or other enterprises to buy privately offered bonds.

Of the 358 businesses that made private offerings last year, 57 issuers incurred losses before issuance, 45 had a debt-to-equity ratio higher than 10, and 10 issuers had issued amounts five times higher than their stockholder equity.

Some enterprises issued bonds to make a capital contribution, buy into other businesses, buy bonds issued by other enterprises, and re-lend capital to other enterprises.

In some cases, businesses publicly offered to sell privately placed bonds on mass media. The bonds offered for sale were ones with high interest rates (11-12 percent per annum). The information about the offers were released by issuers in the primary market, or by related enterprises in the secondary market.

MOF said it is drafting a decree on amending and supplementing some articles of Decree 153/2020 on privately placed corporate bonds in tge domestic market, with stricter requirements to clear existing problems.

MOF has named some real estate firms which issued biggest amounts of bonds, including H.T Land (VND9.65 trillion), Van Truong Phat (VND8 trillion), Osaka Garden (VND7.7 trillion), Becamex IDC Corp (VND6 trillion), Golden Hill (VND5.76 trillion), Vinaconex (VND4.7 trillion), Hoang Phu Vuong (VND4.67 trillion) and Viet Han Real Estate (VND4 trillion).

Luong Bang