Real estate businesses should sell assets to pay off debt

Since April, negotiations to extend corporate bonds, especially those in the real estate sector, have been active amid the pressure of maturity. According to the Hanoi Stock Exchange (HNX), as of October 3, more than 50 issuers had reached agreements to extend bonds with a total value of more than VND95,200 billion. Most of the maturity dates have been adjusted by two years, pushing back the debt repayment pressure to the 2025-2026 period.

However, the Vietnam Association of Realtors (VARS) assessed that this is basically just a transfer of debt to another time. Difficulties still lie ahead because extending debt repayment only helps businesses have time to stabilize production, business and restructure debt. Pressure is still surrounding real estate businesses when the total value of newly issued and repurchased bonds is very low compared to the total value of mature bonds.

In 2022, real estate businesses bought back about VND219,000 billion. In the first 10 months of this year, this figure reached about VND153,800 billion, according to Dr. Can Van Luc at a seminar in early November. Meanwhile, the total value of bonds maturing in the real estate group in the last two months of 2023 and 2024 remained high, reaching VND15,600 billion and VND121,100 billion, respectively, according to statistics from KB Securities Vietnam Company (KBSV).

The list of real estate companies that are late in paying their bond debt obligations is also increasing day by day. According to the Hanoi Stock Exchange (HNX), as of October 3, there were about 69 companies on the list of companies that were late in paying interest or principal on corporate bonds. Most of these are real estate companies.

The Brokers Association believes that real estate businesses need to take advantage of this time to restructure debts, seriously consider selling assets, and even accept breaking even or losing money to have cash flow. This is also a "quiet time" for investors to evaluate and look at conditions to have a more sustainable and effective participation orientation.

Recent statistics from the Ho Chi Minh City Real Estate Association (HoREA) also show that the pressure to repay corporate bonds at the end of the year is also very high. According to HoREA, the fourth quarter is the peak period for bond maturity this year with a total value of up to VND65,500 billion (excluding the extended and postponed bonds). Nearly 80% are real estate corporate bonds.

According to the Vietnam Bond Market Association (VBMA), in the last two months of the year, it is estimated that more than VND41,000 billion worth of bonds matured. Of these, 16 bonds were late in paying interest and principal with a total value of more than VND1,000 billion and 47 bonds had their interest rates extended or changed.

In the long term, the Brokerage Association believes that corporate bonds are still an effective capital mobilization channel, while the size of the Vietnamese market is still modest compared to Malaysia, Singapore, and Thailand. However, there is still a huge information gap between the market and investors.

Therefore, the Association recommends that management agencies complete regulations on credit ratings for corporate bonds issued to the public. The Ministry of Finance and the State Securities Commission should also set up a mechanism to check right from the step of submitting documents of bond-issuing enterprises, instead of detecting violations and canceling successful issuances, causing psychological turmoil in the market.