Corporate bond maturity pressure to ease in Q3: broker VNDirect

Corporate bond maturity pressure will ease in Q3/2024 with a 27.2% quarter-on-quarter decline in the value of private placement bonds coming due at VND38.5 trillion ($1.52 billion), says Vietnam’s leading broker VNDirect Securities.

The real estate group accounts for 49% of this total, followed by banking with 26.7%.

A VNDirect report also notes that the pressure will surge again in the last quarter of this year, with the maturing of bonds worth VND79.2 trillion ($3.13 billion).

There were 119 corporate bond issuances in Q2/2024 with a total value of about VND119.3 trillion ($4.72 billion), 4.1 times higher than Q1 and nearly 3 times higher than the same period last year.

Private placement bond issuances accounted for 97.9% of the total, or VND116.77 trillion ($4.63 billion). The strong Q2 recovery in private placement bonds marked a 7.7 fold increase over Q1 and a 232.8% increase year-on-year.

VNDirect attributed the Q2 recovery to the resumption of bond issuance by the banking group, which mobilized VND85.04 trillion ($3.37 billion), making up 72.8% of the total value of corporate bonds issued via private placement.

"Banks have increased bond issuances in the second quarter of 2024 with the aim of raising the ratio of medium and long-term capital mobilization to ensure the maximum ratio of short-term mobilized capital for medium and long-term loans in accordance with the regulations of the State Bank of Vietnam," the VNDirect report said.

It said “vibrant” negotiations to extend bond terms took place between issuers and bondholders in Q2. As of July 15, more than 90 issuers had reached agreements to extend bond terms and sent official reports to the Hanoi Stock Exchange (HNX). The total value of bonds with extended terms was more than VND151 trillion ($5.98 billion), including VND32.5 trillion worth of bonds due in H1.

The total value of corporate bonds redeemed in Q2 rose 125.9% over the previous quarter at VND53.12 trillion ($2.1 billion), but this was down 37% compared to the same period last year. Banks took the lead with a total value of nearly VND43.72 trillion, accounting for 82.3% of the total.

The report noted that the number of companies that delayed corporate bond repayments continued to rise in the first two quarters.

It also said that the real estate market has bottomed, but remained gloomy, requiring amelioratory measures, particularly regarding legal obstacles.

Although the economy's general production and business activities showed gradual recovery, many businesses were still facing the pressure of capital costs and increasing competition.

In this context, many bond issuers, especially real estate businesses, continued to face cash flow difficulties, leading to slow payment of bond obligations. According to the Hanoi Stock Exchange (HNX), as of July 15, 2024, more than 80 businesses had reported late payment of corporate bond interest or principal.

VNDirect estimated combined outstanding private placement corporate bond debt of the 80 businesses, mostly real estate firms, at about VND190 trillion ($7.52 billion), making up about 18.7% of the market total.

The value of principal bond debt that saw delayed payment in H1/2024 topped VND11 trillion ($435.3 million), accounting for 11% of the total, the report said.