Debt repayment pressure continues to weigh on corporate bond market

An alarming 22 per cent of corporate bonds maturing in January 2025 are at risk of defaulting on principal payments, according to a report from VIS Rating.
Debt repayment pressure continues to weigh on corporate bond market
A customer conducts a transaction at an Agribank office. Around VNĐ5 trillion in corporate bonds is due in January. — VNA/VNS Photo

In the past few years, Việt Nam's corporate bond market has seen significant fluctuations, prompting concerns over the sustainability of debt levels and the overall health of the financial ecosystem.

The latest reports indicate that while the volume of bond issuances increased in 2024, the pressures associated with debt repayment continue to be an urgent issue for many companies, particularly at the start of 2025.

According to a recent report by the Vietnam Investors Service and Credit Rating Agency (VIS Rating), the corporate bond market recorded approximately VNĐ485 trillion (US$19.1 billion) in new issuances last year, up 40 per cent year-on-year.

This surge is primarily driven by the banking sector, which accounted for 70 per cent of the total issuances, while the real estate sector contributed 17 per cent.

Despite this growth, 2024 saw a significant level of payment delays, with 14.5 per cent of bonds facing late repayments.

Yet only 11 issuers were reported to have defaulted on principal or interest payments in 2024, compared to a staggering 79 in 2023.

This reduction in defaults, while encouraging, still raises concerns as we move into a new fiscal year during which an estimated VNĐ224 trillion in bonds will mature.

In 2025, the corporate bond landscape appears daunting.

An alarming 22 per cent of bonds maturing in January 2025 are at risk of defaulting on principal payments, according to the report.

The real estate sector remains the most vulnerable, with residential developers particularly at risk. Among the VNĐ5 trillion in bonds maturing this month, two bonds from this sector are flagged for potential payment delays.

Moreover, a staggering VNĐ110 trillion in bonds issued by real estate companies will come due in 2025, with VNĐ31 trillion already in arrears before the new year.

The overall debt burden is compounded by the fact that 94 per cent of the value at risk primarily stems from the real estate and tourism sectors, highlighting an urgent need for intervention and reform.

The deterioration in credit ratings across various sectors is alarming. VIS Rating's report indicates that 52 per cent of issuers have credit ratings classified as below average or lower, predominantly from the real estate and construction sectors.

Many of these companies are newly established, lacking core business operations and facing severe cash flow limitations.

To address these issues, the Ministry of Finance (MoF) has proposed amendments to the existing regulations governing corporate bonds.

These amendments are designed to enhance market transparency and encourage a culture of credit rating compliance. According to the draft regulations, all bond issuers must obtain a credit rating from a recognised agency approved by the ministry.

This move aims to mitigate risks by ensuring that investors have access to reliable information regarding the financial health of issuers.

The ongoing struggles within the corporate bond market are symptomatic of broader economic challenges.

The real estate sector, for instance, has been grappling with over-leveraging and liquidity issues. With many companies having thin capital buffers, the risk of defaults has escalated, raising alarm bells among investors and regulators alike.

The MoF's proposed regulations also include a stipulation capping the debt-to-equity ratio at four, excluding bonds issued for restructuring existing debt. This aims to safeguard financial stability and ensure companies maintain sufficient equity to meet their obligations.

As Việt Nam navigates these turbulent waters, the focus on regulatory oversight and transparency will be paramount. Investors must be more discerning, conducting thorough due diligence before engaging in bond purchases.

The government and regulatory bodies need to foster an environment that encourages responsible borrowing and lending practices.

Enhancing the credit rating process can also serve as a critical tool for mitigating risks.

By holding issuers accountable and ensuring they maintain healthy financial practices, the market can evolve into a more stable and trustworthy platform for raising capital.

Source: VNA
vietnamnews.vn

Related News

Latest News

Focusing on inspecting inventory of public assets at units with large and complex assets

Focusing on inspecting inventory of public assets at units with large and complex assets

VCN - According to Official Dispatch No. 1456/BTC-QLCS on inspecting the preparation and implementation of the General Inventory of Public Assets recently issued by the Ministry of Finance, the inspection of the inventory of public assets focuses on units with large asset scale and large number of inventory items, complex assets, and slow implementation progress.
The government seeks approval for revised GDP, CPI targets

The government seeks approval for revised GDP, CPI targets

VCN - The Government submitted to the National Assembly for consideration and comments on adjusting the target for the growth rate of gross domestic product (GDP) to 8% or more; the average growth rate of the consumer price index (CPI) to about 4.5-5%.
Fiscal, monetary policies support demand stimulation, price stabilisation

Fiscal, monetary policies support demand stimulation, price stabilisation

These efforts, in conjunction with the implementation of monetary policies and other macroeconomic policies, aim to solve difficulties for businesses and the public, stabilise the macroeconomy, control inflation, ensure the balance of the economy, promote economic growth, and secure social welfare and people’s livelihoods.
Vietnam secures VND 157 billion from state enterprise divestment in 2024

Vietnam secures VND 157 billion from state enterprise divestment in 2024

VCN - The Ministry of Finance reported that in 2024, the divestment of state capital in 5 enterprises (F1) generated VND 157 billion from an initial value of VND 145 billion

More News

Vietnam gears up for potential inflation impact in 2025

Vietnam gears up for potential inflation impact in 2025

VCN - For sound price management and inflation control, Deputy Prime Minister Ho Duc Phoc directed officials to vigilantly track both domestic and international market dynamics. The goal is to proactively develop flexible strategies and solutions, enabling a swift response to any emerging challenges.
VN’s credit conditions in 2025 expected to be stable

VN’s credit conditions in 2025 expected to be stable

The credit conditions for Việt Nam will stabilise in 2025, after improving substantially over the past year, the rating agency VIS is forcasts.
State revenue in first month of the year equal to 14% of the estimate

State revenue in first month of the year equal to 14% of the estimate

VCN - According to the Ministry of Finance, in January - the first month of 2025, the total state budget revenue is estimated at VND275.9 trillion, equal to 14% of the estimate; meanwhile, the total state budget expenditure is estimated at VND134.4 trillion.
Securities 2025 expects a breakthrough in scale and quality

Securities 2025 expects a breakthrough in scale and quality

VCN – The positive factors inherent in the macro economy and the Vietnamese stock market will continue to create the foundation for the market to maintain stability, good liquidity, and growth in both scale and quality in the new year of At Ty 2025, Chairwoman of the State Securities Commission Vu Thi Chan Phuong said.
Cash reserves in stock accounts at six-quarter low amid margin rise

Cash reserves in stock accounts at six-quarter low amid margin rise

These funds are readily available in investor accounts, but remained undeployed as of the year-end.
Five solutions for developing stock market in 2025

Five solutions for developing stock market in 2025

VCN - On February 5, 2025, at the Gong-beating ceremony to open the stock trading at the Ho Chi Minh City Stock Exchange (HOSE), Deputy Minister of Finance Nguyen Duc Chi introduced five solutions for comprehensive development of the stock market.
Minister of Finance Nguyen Van Thang works with GDVC at the first working day after the Tet holiday

Minister of Finance Nguyen Van Thang works with GDVC at the first working day after the Tet holiday

VCN- On February 3, the first working day after the Tet holiday, Minister of Finance Nguyen Van Thang and the delegation visited and worked with the General Department of Vietnam Customs (GDVC).
The stock market after Tết 2025 presents both challenges and opportunities

The stock market after Tết 2025 presents both challenges and opportunities

Việt Nam’s stock market following the 2025 Lunar New Year (Tết Nguyên Đán) presents a complex landscape of risks and potential gains, driven by foreign capital inflows, economic resilience, and looming corporate bond maturity pressures, according to one securities expert.
Opportunities and challenges in Việt Nam

Opportunities and challenges in Việt Nam's crypto boom

Việt Nam boasts one of the most active investment communities in the cryptocurrency sector. However, protecting investors and promoting sustainable growth requires a robust legal framework.
Read More

Your care

Latest Most read
Focusing on inspecting inventory of public assets at units with large and complex assets

Focusing on inspecting inventory of public assets at units with large and complex assets

VCN - According to Official Dispatch No. 1456/BTC-QLCS on inspecting the preparation and implementation of the General Inventory of Public Assets recently issued by the Ministry of Finance, the inspection of the inventory of public assets focuses on units
The government seeks approval for revised GDP, CPI targets

The government seeks approval for revised GDP, CPI targets

The Government submitted to the National Assembly for consideration and comments on adjusting the target for the growth rate of gross domestic product (GDP) to 8% or more
Fiscal, monetary policies support demand stimulation, price stabilisation

Fiscal, monetary policies support demand stimulation, price stabilisation

These efforts, in conjunction with the implementation of monetary policies and other macroeconomic policies, aim to solve difficulties for businesses and the public, stabilise the macroeconomy, control inflation, ensure the balance of the economy, promote economic growth, and secure social welfare and people’s livelihoods.
Vietnam secures VND 157 billion from state enterprise divestment in 2024

Vietnam secures VND 157 billion from state enterprise divestment in 2024

The Ministry of Finance reported that in 2024, the divestment of state capital in 5 enterprises (F1) generated VND 157 billion from an initial value of VND 145 billion
Vietnam gears up for potential inflation impact in 2025

Vietnam gears up for potential inflation impact in 2025

For sound price management and inflation control, Deputy Prime Minister Ho Duc Phoc directed officials to vigilantly track both domestic and international market dynamics.
Mobile Version