Vietnamese real estate corporate bonds warm up

Property businesses in Vietnam issued over VND23 trillion (nearly $981 million) in bonds this March after nearly half a year of "freezing".

The figure accounted for 98% of the total bond insurance value in the whole market, according to the Ministry of Finance (MoF).

According to data from the Hanoi Stock Exchange (HNX), five real estate developers issued large-value bond packages last month, with coupon rates of 6-13% a year.

Hung Yen Urban Development Co., Ltd. mobilized VND7.2 trillion ($307 million) from one-year bonds while Luxury Living Furniture Trading Co., Ltd raised VND4.8 trillion ($204.7 million) from five-year bonds with a coupon rate of 9% per year.

Nam An Investment and International Trading Co., Ltd also successfully offered VND4.7 trillion ($200.4 million) of 18-month bonds, with a rate of 13% a year; while Southern Star Urban Development and Investment Joint Stock Company, formerly a subsidiary of Vietnamese conglomerate Vingroup, also issued VND4,695 billion ($200.2 million) in 18-month bonds with an annual rate of 13%.

In addition, Dream City Villas Real Estate Trading Limited Liability Company successfully raised VND2.3 trillion ($98.1 million) from 5-year bonds with a rate of 6% a year.

According to the MoF, Vietnamese businesses have mobilized more than VND24.7 trillion ($1.05 billion) from corporate bonds in the first three months of this year. Most bond issuances were made in March, after the government’s new decree on private placement of corporate bonds -- Decree 08 -- took effect on March 5, with about VND23.8 trillion ($1.01 billion) or 96% of the total issuance value in Q1.

Meanwhile, in the previous five months, enterprises mobilized no more than VND2 trillion ($85.3 million) per month via the bond channel. However, individual investors remained outside this investment channel due to a lack of confidence. Almost all bonds issued in the first quarter were absorbed by institutional investors, with banks holding 77%.

Decree 08, amending Decree 65 issued in mid-September 2022, which allows issuers to extend their bond maturities by up to two years and pay principal and interest with assets other than cash, has helped gradually defrost the corporate bond market. However, experts forecast that issuers still face huge challenges in the rest of the year.

The MoF said in the first quarter, 69 enterprises reported late principal and coupon payments with a total value of about VND19.2 trillion ($818.8 million). Of these, 23 issuers plan to negotiate with investors for late payments of about VND9.6 trillion or 50%.

An estimated VND113 trillion ($4.8 billion) worth of corporate bonds maturing in the three remaining quarters is at risk of insolvency, according to Vietnam Investors Service And Credit Rating Agency JSC.