Pressure on Corporate bond maturity will fall in mid-2024

VCN – In the first quarter of 2024, the Corporate bond placement has achieved positive results. According to assessment, in 2024, the gradual recovery of the real estate market will promote bond placement from real estate businesses as well as solve problems of late repayment of bond principal and interest in the new cycle.
The corporate bond market will enter new period of development The corporate bond market will enter new period of development
Significant pressure on corporate bonds maturing in 2024 Significant pressure on corporate bonds maturing in 2024
Pressure on Corporate bond maturity will fall in mid-2024
Total value of placed Corporate bond in the first quarter of 2024, reaches VND10,715 billion. Photo: Internet

Value of placed Corporate bond in the first quarter of 2024 reaches VND10,715 billion

According to data compiled by Vietnam Bond Market Association (VBMA) from the Hanoi Stock Exchange (HNX) and the State Securities Commission (SSC), as of March 22, there are three Corporate bond placements with a total value of VND 3,750 billion. Accumulated from the beginning of the year until now, the total value of corporate bond placement reaches VND10,715 billion, with two public placements worth VND2,650 billion and 10 private placements worth VND8,085 billion.

According to assessment, the placement in the first quarter sees positive results compared with the result in the first quarter of 2023.

VBMA data on repurchased corporate bonds shows that in March 2024, businesses repurchased VND4,475 billion of bonds. From the beginning of the year until now, the total value of bonds bought back before maturity reached VND18,278 billion, down 38.4% compared to the same period in 2023. The bond issued by real estate accounts for 45.1% or VND 8,250 billion of total value of bought back corporate bonds.

Regarding corporate bonds maturing, according to VBMA, from now until the end of 2024, the total bond value is VND213,521 billion, of which 37% of the bond value belongs to the real estate group (about VND79,597 billion), followed by the banking group with about VND54,497 billion, accounting for 26%.

According to MSB Securities Company, the pressure on bond maturity from now until the end of the year is still large, especially for real estate businesses. The policy allowing the extension and postponement of bond debt and the exchange of bonds for real estate or other products continues to be extended until 2024, helping many businesses reduce pressure at maturity. However, the total value of corporate bonds maturing is still quite large with about more than VND200 trillion, an increase of 4% compared to the previous year after deducting repurchased bonds. According to MSB, maturity pressure will fall in the second quarter of 2024 (with VND74 trillion) and the third quarter of 2024 (with VND52 trillion).

VIS Credit Rating Company assesses that in 2024, the corporate bond market will enter a new development cycle with improved credit prospects. “We believe that the rate of late payment of principal and interest peaked in 2023. The credit outlook will gradually improve in 2024, and be supported by recovery in domestic business conditions and low capital mobilization costs. This will support businesses' ability to repay debt and seek new financial sources,” said VIS Ratings experts.

The gradual recovery of the real estate market will promote bond placement

In early 2024, the corporate bond market recorded bond placement plans of some major companies. Accordingly, the Board of Directors of Vinhomes Joint Stock Company approved a plan to place private bonds in 2024 with a maximum total value of VND10 trillion. This is a non-convertible bond, without warrants, without collateral with value of VND100 million/bond, term ranging from 2 to 3 years. Rong Viet Securities Joint Stock Company has approved the first private bond placement plan in 2024 with a maximum total value of VND500 billion with a maximum term of 1 year and a fixed interest rate of 8.3%/year.

According to VIS Ratings, in the previous period, the real estate market and the bond market were closely linked. Therefore, the gradual recovery of the real estate market in 2024 will promote bond issuance from real estate businesses as well as solve problems of late payment of bond principal and interest in the new cycle. In addition, legal regulations that better protect bond holders and restore market confidence will help the market develop sustainably.

According to analysis, from 2018-2022, the popular use of special purpose companies with weak credit health to place corporate bonds is one of the main causes of crisis in the corporate bond market. When the bond market faced difficulties in liquidity in the period from quarter 4/2022 to quarter 1/2023, the promulgation of Decree 08/2023/ND-CP in March 2023 helped stabilize the market and support the issuers in handling late payment of principal and interest.

From January 2024, all regulations in Decree No. 65/2022/ND-CP take effect, building stricter discipline for all stakeholders and helping restore market confidence of market, in which credit ratings will assist in making better investment decisions by helping classify the credit health of issuers and assess risks of debt instruments in the primary and secondary markets.

Answering at the questioning session of the 31st session of the National Assembly Standing Committee, Minister of Finance Ho Duc Phoc said that the Law on Securities Law and Decree No. 65/2022/ND-CP and Decree 08/2023/ND-CP provide regulations on credit rating when issuing corporate bonds, including for corporate bond public placement permitted by the Securities Commission. The Minister said he will focus on promoting the credit rating. Accordingly, the issuers of privately placed corporate bonds must publicize the credit rating through period.
By Hoai Anh/Ngoc Loan

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