Sharp decrease in price while banks still face difficulties in collateral liquidation

Sacombank still has not found buyers to sell collaterals which is the land at Ngai Thang Hamlet, Binh An Ward, Di An Town, Binh Duong City.

Decresing price consecutively but it is still slump

Banks are holding auctions and liquidating collateral to recover bad debts. However, despite a sharp decline in prices through many auctions, lots of assets still can’t find buyers. On October 10, to Agribank Asset Management Company Limited (Agribank AMC) will hold a property auction of Mien Trung Mineral Joint Stock Company. The auctioned property is the property which was attached to the leased land and system of machinery and equipment on ​​166,706.5 m2 in Hoai Duc Industrial Cluster, Hoai Duc Commune, Hoai Nhon District, Binh Dinh Province. All these assets were mortgaged by Mien Trung Mineral Joint Stock Company at Agribank Binh Dinh branch under two property mortgage contracts and were seized by the bank to handle the performance of debt payment obligations.

The starting price of this property was 110 billion VND. Previously, Agribank held an auction for this property many times but they failed. In March 2018, this property was auctioned at a starting price of 284 billion VND, then it decreased to 167 billion VND in the auction conducted in September 2018. In the last auction on September 9, Agribank cut the price to 116 billion VND but it was still not attractive to buyers.

Similarly, after serveral unsuccessful auctions, on October 21, Agribank organised a debt auction of Vinh Tien Joint Stock Company. The balance of this debt is nearly 140 billion VND, however Agribank has set the starting price for the debt at 113 billion VND. The collateral of this debt is the land use right area of ​​1,070 m2 (urban residential land) and the property associated with land is a house with a construction area of ​​1,070 m2 located at Cao Xuan Duc Street, Ward 12 , district 8, HCM City. Along with that is a series of machinery systems and cars of Vinh Tien Company. Previously, the bank had held two auctions in August and September 2019 with starting prices of 140 billion VND and 126 billion VND respectively.

On September 17, Agribank also conducted an auction for all debts which had collateral of Thanh Tung Private Company (District 1, Ho Chi Minh City). The book value of this debt is up to 708 billion VND, with the assets nearly 7,000 m2 of land for production in Tan Kien commune, Binh Chanh district, Ho Chi Minh City and future assets are the entire construction value of Hanh Phuc apartment building which would be built on the above land. However, Agribank offered a starting price of only 356 billion VND. Earlier, in the auction in August, Agribank offered a price of 357 billion VND but was unsuccessful.

Together with Agribank, recently, BIDV has announced the selection for conducting auctions of land use rights, ownership of houses and other land-attached assets at the address of No.7 Street No. 1E Trung Son residental area, Hamlet 4B, Binh Hung commune, Binh Chanh district, Ho Chi Minh City. The residential land has an area of ​​204 m2, houses with total use area of ​​222 m2, construction area of ​​108.8 m2. The starting price of the property is 18.5 billion VND. Previously, the bank also announced an auction for the debt of Saigon Pho Dong Trading Construction Co., Ltd. with a total value of 85 billion VND, of that the original debit balance was 31 billion VND, the interest of debit balance and penalty fee was 54 billion VND.

Sacombank is also currently selling many debts and collateral with total value of thousands of billions of VND. Typically, the property rights arise from 27 compensation files with a total area of ​​over 20,800 m2 in Ward 6, District 8, Ho Chi Minh City which was under Bao Hung Residential Project and two other land use rights in this ward that had total area of ​​more than 12,600 m2. The starting price was 711 billion VND, a sharp decrease compared to the 928 billion VND previously offered by the bank. Along with that, Sacombank was also selling assets of 25 land use rights certificates in Ngai Thang Hamlet, Binh An Ward, Di An Town, Binh Duong Province with a starting price of 538 billion VND, a sharp decrease compared to the price of 897 billion VND previously offered by the bank. Similarly, land use rights and constructions in Phong Phu Commune, Binh Chanh District, Ho Chi Minh City with a total area of ​​over 76,200 m2 are also being offered for sale with a starting price of 931 billion VND. Previously, this asset had used to put on sale by the bank for over 1,300 billion VND.

Psychology of “afraid from" of bad debts

Nguyen Hoang Minh, Deputy Director of Ho Chi Minh City State Bank, said since the issuance of Resolution 42, asset collection and handling bad debt by banks have operated faster. However, in some cases, the auction and liquidation of collateral of debts still faces many difficulties due to the issue of property valuation and the starting price offered not being close to the market.

Economic expert PhD. Nguyen Tri Hieu raised a number of reasons that caused difficulties for debts and collaterals to find buyers. Collateral associated with bad debts often has “traces” so it would not have the attraction as usual, causing negative thoughts about assets in customers’ mind. In addition, real estate and projects with bad debts are often set in segments that do not have good development potential, so it would lack attraction in the market. "If it was a 'hot' project, with good prospects, the implementation is certainly convenience and the investor would not fall into the situation of owning bad debt," Hieu said. Another reason was the psychology of wanting to sell at high prices of both creditors and banks, which makes the assest put into auction less attractive to buyers.

Therefore, to promote the liquidation of collateral and bad debt auction, Hieu said it needed to adjust the auction procedures. Accordingly, it was necessary to set a reasonable starting price appropriate with the market. At the same time, it could set a provision that, when conducting an auction, if there was no customer paying price higher than the offered price, the asset would belong to the bank.