Samples of corporate bonds. (Photo: VNA)HoREA Le Hoang Chau said the move is expected to help bolsterinvestor confidence in the market as many real estate firms have failed to makebond principal and interest payments on time.
"A credit package worth up to 70% of the value of the issued bond batchshould be disbursed directly to bondholders," he said.
For the other 30% of the bond batch value, the association has proposed issuersnegotiate with bondholders on a bond payment extension under a recently issuedGovernment decree, he added.
“Decree 08, aimed at removing difficulties for the corporate bond market, isnot effective enough to regain investor confidence in the market,” according toChau.
The decree, which allows issuers to extend bond terms by up to two years, onlyhelps prevent the market from collapsing but it does not actually protect therights and benefits of bondholders, experts said.
The controversial proposal comes at a time when the State Bank of Vietnam (SBV)has tightened credit into risky sectors, such as real estate, to ensure capitalflows into priority fields, such as manufacturing.
The SBV has recently inspected commercial banks to ensure they are in line withthe Government’s requirements related to monetary policies and therestructuring of bad debts.
According to data from the SBV, credit to the real estate sector was worth 2.58quadrillion VND (109 billion USD) as of the end of 2022, up 24.3% year-on-yearand accounting for 21.2% of the entire economy’s total outstanding credit.
The corporate bond market boomed in 2020 and 2021, with an issuance volume of 462trillion VND and 658 trillion VND, respectively, according to the Vietnam BondMarket Association.
However, following arrests and investigations related to the bond issuance andimproper use of capital by several major real estate developers last year, themarket has suddenly become frozen.
Aggressive bond issuance for the past few years has caused huge pressure onissuers, mostly property developers, as they are now facing serious liquiditycrises and cannot issue new bonds to restructure debts.
VNDirect Securities Corporation estimates the maturity value of corporate bondsthis year at nearly 273 trillion VND, mainly in the second and third quarters.
Many issuers have constantly violated their obligations to pay principal andinterest while a number of individual bond investors are looking to sell bondsat a 14-17% discount to get cash back.
Despite the stagnant corporate bond market, it has potential to grow due tohigh capital demand from businesses, experts have said.
They have, however, pointed out that investor confidence will not return unlessthe Government addresses all the problems they face and safeguard their rights.
In a related issue, the city government has ordered the Departmentof Construction to continue working with relevant agencies to remove challengesfacing 156 real estate projects in the city, mostly legal bottlenecks, a demandalso made by HoREA.
Bui Xuan Cuong, deputy chairman of the People’s Committee, has instructed thedepartment and relevant agencies to work with HoREA and real estate developerson this issue and report back to the city authorities by April 15./.
VNA
