Handling bonded debt by real estate will speed up the settlement of bad debt

VCN – One of the most important points of Decree 08/2023/NĐ-CP amendments to some articles of decree prescribing the private placement and trading of privately placed corporate bonds is allowing swaps of bonded debt with real estate. The allowance of a bondholder to make payment of bond principal/interests using other assets like real estate is appropriate as the market is facing difficulties. However, accurate real estate pricing to pay the debt to bondholders will not be easy.
Handling bonded debt by real estate will speed up the settlement of bad debt
A reasonable price is an important issue for a successful negotiation with bondholders. Photo: Hoài Anh

Legal basis will accelerate the settlement of bad debts of corporate bond

Decree 08/2023/NĐ-CP dated March 5, 2023 amends and suspends some articles of decree prescribing private placement and trading of privately placed corporate bonds in the domestic market and offering of corporate bonds in the international market.

One of the most important points of Decree 08/2023/NĐ-CP is that in case of the offering of bonds in the domestic market where the issuer is unable to make full and timely payment of bond principal/interests in VND according to the issuance plan disclosed to investors, the issuer may reach an agreement with bondholders on payment of bond principal/interests using assets.

The payment must be made with the consent of bondholders; the issuer shall make ad hoc information disclosure and assume full responsibility for the legal status of assets used for paying bond principal/interests in accordance with legal regulations.

Regarding this issue, the Vietnam Association of Realtors said that, in recent times, many enterprises have chosen to restructure bond debt in the form of swapping into other assets such as real estate.

"If it is approved by investors, this is a way to resolve debts in the context of the corporate bond market being quiet, quite a lot of businesses have to "forgive" their bonds when they are due," the Vietnam Association of Realtors said.

The Hanoi Stock Exchange (HNX) has announced a list of issuers who have delayed payment of bond principal and interest during the period from September 16, 2022 to January 31, 2023. Accordingly, there are 54 enterprises that are late to pay bond principal and interest, including 34 enterprises operating the real estate-construction sector.

The report on the corporate bond market of Fiin Ratings also showed that, in the first two months of 2023, the real estate industry only recorded a successful batch of bonds issued by a real estate company.

Meanwhile, in 2023, the amount of bonds maturing is very large, about VND 205,000 billion, of which VND 104,000 billion of bonds matured from real estate companies.

Accordingly, the Vietnam Association of Realtors believed that the specific regulation of the principle of swapping bonds by real estate in the Decree will be the legal basis to promote the handling of bad debts of corporate bonds, helping bondholders to have more choices.

Accurate real estate pricing is a key problem

However, taking assets to repay bonds is not entirely in the hands of enterprises, enterprises also have to negotiate with bondholders. To successfully negotiate and convince the bondholder to agree, the enterprise needs to prove to the bondholder that owning the asset is attractive. If the bondholder does not approve, the enterprise will still have to manage to repay the debt in cash.

Therefore, the issuer needs to have a pricing level for bondholders to agree with a reasonable price is an important issue for a smooth and successful negotiation with bondholders in the context of thousands of bondholders having different demands and decisions. This showed that the accurate pricing of real estate to pay debt to bondholders will be a tough issue.

According to the Vietnam Association of Realtors, swapping bonded debts by real estate will create opportunities for creditors to actively choose and own houses at an agreed price. When accepting this price, the issuer will no longer have any debt obligations, but the bondholder will continue to face the risk of asset devaluation or legal problems related to the asset.

For example, the risk of co-owning real estate with other investors or having to spend more money to own separately due to the small investment amount; the risk of issuers pushing up real estate prices to clear the debt. Therefore, bondholders need to determine the price of swap real estate, negotiate fees when carrying out conversion procedures, especially learn about project legality.

Commenting on this new point, Dr. Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors, said that the regulation that allows bond issuers to negotiate with bondholders to pay bond principal/ interest with other assets will help to remove bottlenecks for businesses at this time and open up opportunities for enterprises to have more options to handle the bond. However, a prerequisite is that there should be a negotiation between the enterprise and the bondholder.

Along with that, a number of regulations on bonds in Decree 08 will also help real estate businesses with bonded debt not to fall into a deadlock, opening up hope for them, giving them more time to restructure their debts, have an appropriate plan to restructure the product, have development opportunities, and benefit the market, investors and the economy in general.

Regarding the new points of this Decree, Fiin Ratings expected the current new policies, including Decree 08 on privately placed corporate bonds and Resolution 33 on removing difficulties for the real estate market recently issued by the Government will be the foundation for market participants to carry out debt restructuring activities as well as support investors to access new sources of credit when measures of legal issues of real estate are implemented.

According to data from Fiin Ratings, the total value of individual corporate bonds maturing in 2023 is estimated at VND 235 trillion. In particular, real estate businesses have bond balances that will mature at VND 100 trillion. The total outstanding balance of privately placed bonds maturing in the next two quarters stands at VND36.2 trillion in quarter 2 and VND35.4 trillion in quarter 3, respectively.

By Hoài Anhh/Thanhh Thuy

Related News

Without resolving three significant bottlenecks, real estate market

Without resolving three significant bottlenecks, real estate market's revival will face numerous challenges

VCN - Economic expert Vu Dinh Anh shares insights on the real estate market's recovery trajectory in 2024.
Credit package of VND120 trillion: must be disbursed as soon as conditions are met

Credit package of VND120 trillion: must be disbursed as soon as conditions are met

VCN - According to the State Bank of Vietnam (SBV), so far, only 28 out of 63 provincial People's Committees have sent documents or announced the list of projects participating in the VND120 trillion credit package, including 30 out of 68 projects with capital borrowing needs.
Many real estate businesses face difficulties of cash flow

Many real estate businesses face difficulties of cash flow

VCN - Although many policies to overcome difficulties have been put forward by the Government, ministries and branches but many real estate businesses face the situation of being "thirsty for money". Finding solutions to unlock capital sources for the real estate market to promote recovery and development is essential.
Several real estate businesses were forced to pay taxes

Several real estate businesses were forced to pay taxes

VCN - Many real estate businesses with tens of billions of VND in tax debt have been forced by the Customs authority to stop customs procedures at the request of the Tax authority.

Latest News

Improving legal framework, ensuring accessibility to green bonds

Improving legal framework, ensuring accessibility to green bonds

VCN - This is the recommendation of Mr. Nguyen Tung Anh (photo), Head of Credit Risk Research and Sustainable Financial Services (FiinRatings) in an interview with Customs Magazine reporters about green bond market development in Viet Nam.
Foreign experts discuss ways to help Vietnam upgrade stock market

Foreign experts discuss ways to help Vietnam upgrade stock market

Chairwoman of the State Securities Commission (SSC) Vu Thi Chan Phuong has held a working session with representatives from FTSE Russell and Morgan Stanley to discuss how to upgrade the Vietnamese stock market.
Ambitious profit goals of banks

Ambitious profit goals of banks

VCN - With low profits and expectations of a better economic situation, banks "boldly" submitted to the General Meeting of Shareholders profit targets with high growth rates.
PM demands strengthened gold market management

PM demands strengthened gold market management

Prime Minister Pham Minh Chinh has asked the State Bank of Vietnam (SBV) to keep a close watch on international and domestic gold prices, and put in place measures and tools in a timely and effective way to regulate the gold market in line with regulations.

More News

Budget expenditures reached VND393.5 trillion, growing 8.3% over the same period in the first quarter

Budget expenditures reached VND393.5 trillion, growing 8.3% over the same period in the first quarter

VCN - The Ministry of Finance said that the total balance of budget expenditure in March was estimated at VND140.3 trillion; accumulated budget expenditures in the first quarter of 2024 reached VND393.5 trillion, equal to 18.6% of current appropriation, an increase of 8.3% over the same period in 2023.
Inflationary pressure stems  from commodity price fluctuations

Inflationary pressure stems from commodity price fluctuations

VCN – According to a report from the Ministry of Finance, the domestic market prices in the first quarter were stable and fluctuated in accordance with the price management scenario of the Price Management Steering Committee. However, the current impact from adjusting the prices of essential goods is a pressure on inflation control.
SMEs offered loans at preferential rates of 1.2-4.4%

SMEs offered loans at preferential rates of 1.2-4.4%

To create additional capital mobilisation channels for small- and medium-sized enterprises (SMEs), Vietnam’s Small- and Medium-sized Enterprise Development Fund under the Ministry of Planning and Investment is offering SMEs loans at preferential interest rates of 1.2-4.4% per year.
Public investment disbursement needs to be accelerated to boost growth: insiders

Public investment disbursement needs to be accelerated to boost growth: insiders

Public investment is currently still an important growth driver, which needs to be accelerated so as to help the economy achieve a 6.5% growth this year, according to insiders.
Banks seek to attract foreign capital

Banks seek to attract foreign capital

VCN - Banks are actively developing plans to attract capital from foreign investors through various methods, aiming to enhance their capital "buffers" and improve their management and operational standards to meet international levels.
Budget revenue collection for the first quarter of 2024 achieved quite well compared to current appropriation

Budget revenue collection for the first quarter of 2024 achieved quite well compared to current appropriation

VCN - In the first 3 months of 2024, total revenue collection is estimated to reach VND539.5 trillion, equal to 31.7% of current appropriation, an increase of 9.8% over the same period in 2023. According to the Ministry of Finance's assessment, revenue of the first quarter of 2024 is quite good compared to current appropriation, mainly due to the concentration of revenues arising in the fourth quarter of 2023 and the difference according to the tax finalization 2023 following the regime of declaration and payment to the state budget in the first quarter of 2024.
Continue to implement and complete important customs cooperation initiatives in ASEAN

Continue to implement and complete important customs cooperation initiatives in ASEAN

VCN - Talking to the press on the sidelines of the 28th ASEAN Finance Ministers' Meeting (AFMM 28) taking place in Luang Prabang, Laos, Vietnam’s Minister of Finance Ho Duc Phoc emphasized that the meeting affirms the determination of ASEAN financial agencies to strengthen cooperation and work together to solve common challenges of the region in the context of the world and the region facing many changes, difficulties and challenges.
28th AFMM, 11th AFMGM gain great success

28th AFMM, 11th AFMGM gain great success

VCN - In the framework of ASEAN 2024 Financial Cooperation, the 28th ASEAN Finance Ministers' Meeting, the 11th ASEAN Finance Ministers' and Central Bank Governors’ Meetings and related conferences were held in Luang Prabang, Laos from April 4-5. Minister of Finance Ho Duc Phoc led the delegation of the Ministry of Finance of Vietnam to attend the meetings.
Many positive signals from stock market upgrade

Many positive signals from stock market upgrade

VCN - Many crucial knots in the process of upgrading the stock market are being untangled by the Government and relevant agencies. Thanks to proactive moves from the management agencies, experts assessed that the stock market was likely to be upgraded according to the set objectives.
Read More

Your care

Latest Most read
Improving legal framework, ensuring accessibility to green bonds

Improving legal framework, ensuring accessibility to green bonds

VCN - This is the recommendation of Mr. Nguyen Tung Anh (photo), Head of Credit Risk Research and Sustainable Financial Services (FiinRatings) in an interview with Customs Magazine reporters about green bond market development in Viet Nam.
Foreign experts discuss ways to help Vietnam upgrade stock market

Foreign experts discuss ways to help Vietnam upgrade stock market

Chairwoman of the State Securities Commission (SSC) Vu Thi Chan Phuong has held a working session with representatives from FTSE Russell and Morgan Stanley to discuss how to upgrade the Vietnamese stock market.
Ambitious profit goals of banks

Ambitious profit goals of banks

VCN - Setting the target of a sharp increase in profit is VPBank. According to the draft 2024submitted to the General Meeting of Shareholders, VPBank targets consolidated pre-tax profit in 2024 to increase by 114% compared to 2023, equivalent to VND 23,16
PM demands strengthened gold market management

PM demands strengthened gold market management

Prime Minister Pham Minh Chinh has asked the State Bank of Vietnam (SBV) to keep a close watch on international and domestic gold prices, and put in place measures and tools in a timely and effective way to regulate the gold market in line with regulations.
Budget expenditures reached VND393.5 trillion, growing 8.3% over the same period in the first quarter

Budget expenditures reached VND393.5 trillion, growing 8.3% over the same period in the first quarter

The Ministry of Finance said that the total balance of budget expenditure in March was estimated at VND140.3 trillion
Mobile Version