Three options for restructuring bond debt: FiinGroup

VCN - FiinGroup has suggested three options to restructure bond debt for bond issuers in the current context. Accordingly, the debt restructuring plans should be developed and negotiated before maturity.
Bond yields rise in emerging East Asia Bond yields rise in emerging East Asia
MoF works with corporate bond issuers and securities companies MoF works with corporate bond issuers and securities companies
Credit institutions and real estate businesses continue to repurchase bonds Credit institutions and real estate businesses continue to repurchase bonds
Three options for restructuring bond debt: FiinGroup
Redemption value of bonds in the first 10 months of 2022

Accordingly, the first option is to extend the repayment period with partial debt payment. Businesses that have the capacity and want to pay their debts face difficulties in the short term and want to extend the repayment period to overcome this period.

According to FiinRatings, the partial payment and the extension of the payment deadline for the remaining debt amount help enterprises implement principal and interest payments, and the bond issuers maintain creditworthiness for capital mobilization in the future. The issuers should proactively notify investors about their production and business situation, project implementation and repayment schedule and offer an appropriate interest rate. In addition, investors should actively review the project's legal status and implementation progress before agreeing to extend the repayment period.

The second option provided by FiinRatings is to extend the repayment period without payment of the principal. Accordingly, if the issuer suffers from great difficulties and cannot maintain production and business activities, the investor may need to accept a certain discount to complete the project.

Specifically, the investor may have to accept the extension or postpone principal payment but can still maintain the chance to recover the principal and interest in the future, depending on the re-evaluation. However, FiinRatings also noted that the option of partial debt non-repayment is relatively sensitive and affects the issuer's reputation. Therefore, businesses should develop a plan and negotiate with the bond issuer before maturity to avoid violation.

FiinRatings also noted that the option of partial debt non-repayment is a relatively sensitive

The third solution is barter. This operation has taken place and achieved positive results. However, this option needs consensus between the investor and the issuer.

According to FiinRatings, this is a key option and depends on the nature of the business operation and products of each enterprise. The investor can agree with this option when they have full information and legality about the assets used for bond swap.

FiinRatings also reported that the bond default rate in the Chinese market at the end of 2021 was 1.35%. The bond debt restructuring is mainly implemented via self-agreements such as extending debt payments and bond swaps. About 79% of international bond defaults were handled by the bond swap method, and 72% of domestic defaults were resolved by debt extension.

Market participants resolved most bond defaults in China without court proceedings or intervention of regulatory agencies. This rate accounted for 76% of defaulted bonds. The number of deferred bonds accounted for 56%. FiinRatings said this would be an appropriate option for investors and issuers in Vietnam in the short term.

However, FiinRating also noted that this is only a short-term solution when the problem cannot be solved completely. The Chinese market suffered from the second default and needed the support fund from the Government worth US$ 29 billion in September.

Regarding the redemption of corporate bonds, the redemption value in 10 months of the year increased by 41.9% year-on-year to VND 143.44 trillion, mainly near-maturing bonds. Real estate and credit institutions are the two sectors with the largest bond redemption volume, reaching 21.1% and 63.6% of the redemption value since the beginning of the year. The redemption of the real estate sector's bonds hit VND 12,425 trillion in June and July (equivalent to 41% of the total value of 10 months of 2022).

The redemption of corporate bonds surged between June and September to VND94.4 trillion, equivalent to 56.6% of the total value in 2022. Although the redemption has put financial pressure on enterprises, we believe this is a positive sign for the current liquidity, especially for businesses with sufficient financial capacity, minimizing debt burden amid the current high-interest rates.

The surge in the redemption of corporate bonds in a short time also created pressure. In the first 10 months of this year, the real estate market witnessed a low level of liquidity, causing a sharp increase in the inventory of many real estate businesses and a reduction in the cash flow of these businesses. Meanwhile, some businesses did not actively repurchase corporate bonds but were requested by investors to pay them off early due to concern about negative information.

FiinRatings assesses that the solvency of real estate developers will be reduced, especially when the capital channel into this sector has been narrowed and controlled more strictly than the previous year. Therefore, investors should keep calm and avoid selling off corporate bonds without carefully assessing the business's financial health.

By Nguyen Hien/Ngoc Loan

Related News

Issuers seek solutions to delay bond debt payment

Issuers seek solutions to delay bond debt payment

The volume of mature bonds of businesses will peak in 2023 - 2024 and bond issuers are taking different actions to proactively remove difficulties.

Latest News

Banks increase non-interest revenue

Banks increase non-interest revenue

VCN - Slow credit demand and fierce competition have forced banks to seek ways to increase non-interest revenue, especially when there is a lot of support from the digital transformation of the entire banking system.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN – In order to achieve goal of strictly managing public debt and maintaining security and safety of the national financial system in 2025, it is necessary to ensure the borrowings and repayments of public debts is within the approved estimate; closely monitor public debt indicators to ensure that they are within the ceiling and warning thresholds approved by the National Assembly.

More News

Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

VCN - On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws. Concluding the session, Vice Chairman of the National Assembly Nguyen Duc Hai emphasized the need for the Government to direct the drafting body and relevant agencies to collaborate closely to finalize a persuasive and widely supported report, ensuring the quality of the draft law for the National Assembly's consideration and decision.
Transparency evates the standing of listed companies

Transparency evates the standing of listed companies

VCN - According to the Hanoi Stock Exchange (HNX), the number of companies placed under warning, control, or restricted trading on the listed and registered markets has increased over the past two years compared to 2022.
State-owned securities company trails competitors

State-owned securities company trails competitors

Contrary to the outstanding performances in the banking sector, the securities subsidiaries of major banks have yet to fully leverage their potential, despite numerous inherent advantages.
Strengthening the financial “health” of state-owned enterprises

Strengthening the financial “health” of state-owned enterprises

VCN - The state economy plays a key role in the socio-economic development process, but it is necessary to strengthen the financial health and competitiveness of state-owned enterprises (SOEs).
U.S. Treasury continues to affirm Vietnam does not manipulate currency

U.S. Treasury continues to affirm Vietnam does not manipulate currency

VCN - In its latest report, the U.S. Department of the Treasury has positively assessed Vietnam's monetary policy, reaffirming that Vietnam does not engage in currency manipulation.
Exchange rate fluctuations bring huge profits to many banks

Exchange rate fluctuations bring huge profits to many banks

Net profits from the foreign exchange trading segment of many banks have gained positive results thanks to a strong USD/VNĐ exchange rate fluctuations this year.
A “picture” of bank profits in the first nine months of 2024

A “picture” of bank profits in the first nine months of 2024

VCN - Pre-tax profits for banks during the first nine months of 2024 remained positive, exceeding 200 trillion VND, solidifying the sector's position as a market leader.
Many challenges in restructuring public finance

Many challenges in restructuring public finance

VCN - Restructuring public finance is an important step to improve state financial management, ensure resources are allocated reasonably and effectively, contributing to the country's sustainable development. In addition to the achieved results, the process of accelerating public finance restructuring also faces many pressures.
Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

VCN - E-commerce platforms that declare and pay taxes on behalf of traders not only help to reduce the number of tax declaration points but also reduce the cost of compliance with administrative procedures for the whole society because only one point as the e-commerce trading platform implements tax deduction, payment and declaration on behalf of tens, hundreds of thousands of individuals and business households on the platform.
Read More

Your care

Latest Most read
Banks increase non-interest revenue

Banks increase non-interest revenue

VCN - In the first 9 months of 2024, the group of banks leading in profit has focused on increasing the ratio of non-term deposits (CASA) to help reduce operating costs, resulting in positive credit growth.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN - According to the plan for borrowing and repaying public debt and foreign debt of the country in 2025, the total borrowing demand of the Government in the year is expected to be at VND 815,238 billion, an increase of 20.6% compared to the Government'
Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws.
Mobile Version