REAL ESTATE BONDS PLACE PRESSURE ON ISSUING FIRMS

Nearly 36% of bonds issued by real estate firms are approaching maturity and thus piling greater pressure on issuers at this critical juncture, the Ministry of Finance said on April 22.

The ministry’s recent report underscores concerns within Vietnam’s corporate bond market for 2023 and 2024. It emphasizes the critical need to address hindrances to the real estate sector in line with the objectives provided in Government Resolution No. 33/NQ-CP, which aims to stabilize the industry.

Although a reduction in bond maturities is anticipated for 2024 compared to 2023, those sectors susceptible to payment difficulties such as real estate and renewable energy will have to cope with the heavy burden of bond redemption. Around VND35.8 trillion, representing nearly 36% of real estate bonds, are expected to encounter payment challenges.

By the end of 2023, the outstanding corporate bond debt of 432 issuers had amounted to VND1 quadrillion. The total value of bonds that will fall due this year is VND240 trillion, a decline from the VND261.6 trillion maturity volume in 2023.

Banks are perceived as low-risk borrowers due to stringent capital adequacy requirements mandated by regulators and close supervision by the State Bank of Vietnam, ensuring their financial stability. The majority of bondholders are institutional investors.

Vietnam’s real estate sector is a major borrower in the country’s bond market, representing a substantial 35% of all outstanding bonds. The sector carries a debt burden of VND351.4 trillion, divided between secured (VND285.2 trillion) and unsecured (VND66.2 trillion) bonds, with institutional investors holding the majority (58.6%) compared to individuals (41.4%).

Source: The Saigon Times