How property developer Kita Group restructures debt for Sacombank

The emergence and land fund expansion of real estate developer Kita Group’s members have been associated with their engagement in the auctions of debts at Ho Chi Minh City-based lender Sacombank.

A report from Vietcap Securities JSC said that Sacombank, listed on the Ho Chi Minh Stock Exchange (HoSE) as STB, has successfully resolved debts related to the Phong Phu Industrial Park.

The IP is managed by Phuong Phu Industrial Park JSC, whose new CEO and legal representative, Tran Tan Hong Cuong, is currently deputy CEO of Kita Group.

Sacombank is said to have received 20% of the total payment and the rest will be paid in the next two years. The bank did not disclose the selling price, but Vietcap estimated it at VND7.9 trillion ($310.4 million) - the offered starting price for the Phong Phu-related debt.

In a related development, Sacombank's receivable balance sheet increased by nearly VND13.3 trillion in the last three months of 2023 to VND42 trillion ($1.65 billion).

In July 2023, Global Partnership Auction Company announced an auction of 18 debts secured by property rights at Phong Phu Industrial Park proposed by Sacombank.

The total outstanding balance of these debts as of December 31, 2021 was VND16.2 trillion ($636.54 million). Of which, outstanding principal debt was more than VND5.13 trillion and outstanding interest was over VND11.06 trillion. The starting price of the auctioned debts was VND7.93 trillion ($311.75 million).

This was not the only bad debt at Sacombank to be handled by Kita Group, the Vietcap report said.

Kita Invest, a member of Kita Group, successfully auctioned off more than 60 hectares belonging to the Binh Thuy Ward Residential Area project in the Mekong Delta city of Can Tho. This asset was auctioned by Sacombank with a starting price of over VND3.65 trillion ($143.42 million).

Previously, in April 2019, Global Auction Services JSC also organized an auction for the same land. The land had belonged to Ngan Thuan Construction Company Limited - a business once owned by the family of businessman Tram Be.

After falling into the hands of the new owner, the project was renamed Stella Mega City and was evaluated by Kita Invest as one of its strategic projects. It covers up to 150 hectares, 2.5 times the area that Sacombank previously offered for sale. This showed that Kita Group was likely to have quietly purchased the surrounding land in advance.

Another project belonging to Kita Group that follows a similar "motif" is the Stella 927 building on Tran Hung Dao street, Ward 1, District 5, Ho Chi Minh City. In 2019, Sacombank auctioned off 16 floors (12th to 27th) in the building. The building was previously called Fico Tower, invested by Tan Bach Viet Construction Investment Company Limited - an affiliate of Construction Materials Corporation No. 1 (FICO). Saigon Commercial Joint Stock Bank (SCB) has been renting this building as its headquarters for many years.

Notably, Golden Belt Commodities Company Limited, a legal entity belonging to Kita Group, won the auction for part of plot No. 122 in Binh Tri Dong B ward, Binh Tan district, HCMC (with an area of 60,960 square meters) under the Tan Lap Son project and all property rights arising from the compensation of a 372,152-square-meter area under the Sub-zone 3 sports, entertainment and high-rise housing project in Binh Tri Dong residential area.

The above mentioned assets were used by Saigon New Urban Area Investment Joint Stock Company (Saigon NIC) as collateral for a loan at Sacombank. This bank, in an effort to eliminate bad debts from the "old dynasty", auctioned the above land plot with a starting price of VND6.03 trillion ($236.94 million).

Saigon NIC received the transfer of controlling shares at Phong Phu Industrial Park JSC from Binh Chanh Construction Investment Shareholding Company. This legal entity also mortgaged millions of VietCapital Bank shares at Sacombank.

How does Kita Group operate?

According to its financial statement, Kita Invest said it earned a net profit of VND44.5 billion ($1.75 million) last year, a nine-fold increase year-on-year.

As of end-2023, its total assets were valued at VND15.17 trillion ($596.3 million), up 31.2% from end-2022, while its equity rose by 4.1% in the period to VND1.2 trillion ($47.3 million).

Kita Invest's liabilities as of the end of 2023 had reached VND13.97 trillion ($549 million), up 34% from the beginning of the year. Of this, VND843 billion ($33.13 million) was in bonds, a steep reduction from VND2.54 trillion ($99.9 million) after Kita Invest bought back bonds ahead of maturity last year.

Binh Tan Trade Investment JSC, the legal entity associated with Kita Group, announced a net loss of nearly VND90 billion ($3.54 million) in 2023, from a net profit of VND302 million the previous year.

At the end of 2023, Binh Tan's total assets stood at more than VND4.32 trillion ($169.75 million), an increase of over 3% compared to the beginning of the year. Of which, equity was VND1.31 trillion, up nearly 64%, and liabilities were VND3.15 trillion, down more than 10%.

The outstanding bond balance of Binh Tan was VND1.3 trillion ($51.08 million). The bond package, with a term of 60 months, will mature on November 1, 2026.

In December 2021, Binh Tan signed a deposit contract with Vimedimex Group to purchase/transfer a commercial center project on land lot TM01 under the Nam Thang Long Urban Area project, located at the foot of Nhat Tan Bridge, Hanoi (also known as The Lotus Center).

The deal took place right after former Vimedimex chairwoman Nguyen Thi Loan was detained for violating land auction regulations in November 2021.