A series of businesses have announced their inability to repay bond debts and proposed postponement or rescheduling amid a severe lack of capital.
2022 profit data showed a clear weakening in firms’ business activities. In addition, tightened credit and unfavorable developments on stock and bond markets have caused many enterprises to request a delay in repayment of maturing bonds.
Duc Long Gia Lai Group JSC (DLG) has submitted a written request for a delay in debt repayment of bonds of more than VND181 billion ($7.67 million) issued on December 30, 2017 and maturing on December 30, 2022. The batch includes 134 bonds with par value of VND1 billion ($42,370) and an interest rate of 10% per year.
According to the document, DLG has to pay more than VND117 billion in principal and more than VND64 billion in interest. The company said it is negotiating to reach an agreement with bondholders to extend the principal and interest repayment deadline in accordance with the law. It also attributed the slow repayment to its difficult production and business situation, high interest rates and tightened credit.
In January 2023, Hung Thinh Incons JSC announced the late repayment of principal value and interest on bonds that matured on December 31, 2022. This package has an issuance value of VND300 billion ($12.7 million) and the company still owes investors VND210 billion in principal.
Hung Thinh Incons "begged" investors to pay half of the principal in early March 2023 and the other half at the end of that month as it is facing difficulties in cash flow.
Last week, An Giang Import-Export Company (Angimex) held a meeting with bondholders to ask for their opinions on a plan to deal with two bond packages issued on November 9, 2021 and March 14, 2022, with a total value of VND650 billion ($27.54 million).
Angimex revealed that force majeure events relating to personnel and tight monetary policy have caused a lot of difficulties for the company. It also vowed that it would work to find capital sources to pay the principal value and interest on the two bond packages. In late 2022, Angimex also failed to pay interest for holders of these bonds.
Other businesses begging for bond repayment postponment include Casablanca JSC in the southern province of Ba Ria-Vung Tau and Vina2 Investment and Construction JSC (VC2).
Bond maturity pressure
According to the Vietnam Bond Market Association (VBMA), about VND289,819 billion ($12.28 billion) of bonds will mature in 2023. The figure in the first month of the year was about VND17,500 billion ($741.45 million), of which the real estate sector accounted for VND10,500 billion or 60% and the construction industry VND5,900 billion or 34%.
VBMA's latest data also showed that in January, there had been no corporate bond issuance.
According to Vietcombank Securities (VCBS), the size of the corporate bond market in 2023 will continue to shrink as the volume of maturing bonds is large, while new issuances are significantly limited by Decree 65 on private placement of corporate bonds. In addition to high issuance costs, the amount of redeemable bonds will also further downsize the market.
VCBS estimated that corporate bonds maturing in 2023 will be valued at about VND250,000 billion ($10.59 billion), a significant decrease from the third quarter of 2022 thanks to issuers’ proactive bond redemption.
Notably, the redemption value of the banking and real estate industries in the fourth quarter of 2022 reached VND35 trillion ($1.48 billion) and VND24 trillion ($1.02 billion), respectively. Active bond redemption helps businesses and issuers stay more proactive in bond repayment. This move also shows significant efforts to arrange capital, relieving pressure from bond maturity in the near future.
"The bond maturity pressure will be great in the next three years and 2023 is still the period to accelerate restructuring activities, rearrange collateral, and implement complete information disclosure in accordance with Decree 65," VCBS said.