Vietnamese firms default on $5.5 bln in bond payment obligations

Ninety eight Vietnamese issuers failed to fulfill their bond payment obligations with a total value of VND128.5 trillion ($5.48 billion) from April 17 to May 4, up 13.6% from one month ago, according to leading domestic credit ratings agency FiinRatings.

Following a vibrant March, the corporate bond market in April recorded only one privately placed bond issuance worth VND671 billion ($28.65 million) from real estate developer North Star Holdings JSC. As a result, the month’s issuance volume was equivalent to 2.5% of the previous month and 2.25% compared to the same period last year.

This issuance has a term of 16 months with a coupon rate of 14% per year, the highest nominal rate recorded since the beginning of 2023.

The value of bonds redeemed before maturity in April reached nearly VND11.3 trillion ($482.5 million), down 41.61% from the previous month and 10% year-on-year, said FiinRatings.

Redemptions mainly came from the banking group, accounting for 61% of the total value of repurchased bonds. The value of bonds bought back by banks increased by 5.64 times from the previous month and 2.42 times from the same period last year.

The biggest repurchasers were VIB bank, Sacombank, VPBank, and BIDV. Most of the bonds redeemed by this group have a term of 3 years and will mature in 2024 or 2025.

After the government issued Decree 08/2023/ND-CP on March 5, allowing issuers to extend their bond maturities by up to two years and pay principal and interest with assets other than cash, the corporate bond market recorded a number of bond maturity extensions.

Phat Dat Real Estate Development Corporation, listed on the Ho Chi Minh Stock Exchange (HoSE) as PDR, on May 4 extended the payment of a bond batch worth VND148 billion ($6.32 million) until July 2023 and raised its coupon rate from 13% to 15% per year.

Most recently, Hanoi-based electronic component manufacturer Encapital Holdings JSC has successfully extended a bond package of VND130 billion ($5.55 million), with the coupon rate lifted from 10.5% to 11% per year.

In a recent report, top securities broker VNDirect estimated the maturity value of corporate bonds this year at nearly VND252 trillion ($10.63 billion), a year-on-year increase of 64%. This includes VND160 trillion ($6.75 billion) in the second and third quarters. Real estate businesses account for the largest proportion with 43%, or VND107.7 trillion ($4.54 billion).