A construction site in Da Nang city. The real estate business accounted for around 73% of the total delayed bond payments. (Photo: VNA)For the first six months of the year, about 82 firmsreported late or delayed payment of bond principal and interest, bringingthe total estimated value of deferred bond payments to 183 trillionVND (7.71 billion USD), representing 17% of the total marketfor corporate bonds in the country.
The real estate business accounted for around 73% of thetotal delayed payments.
The corporate bond market, on the other hand, showed signs ofrecovery in the second quarter, particularly in June, with more than 30.6trillion VND in bonds issued.
For the first half of 2023, nearly 65.3 trillion VND worth ofbonds were released, a decline of 65% over last year, according to MBSResearch. This is a tough time for the market, as the issuance value has fallensharply in the last five years.
During the period, the weighted average maturity of mobilisedbonds was 3.79 years, while the average deposit interest rate was 10.1%, higherthan the 2022 average rate of 7.9%.
The real estate sector recorded the highest issuance value in thefirst six months of 2023, accounting for more than 50% of the total value ofissued bonds since the beginning of the year.
Notable issuances from the property developers were a batch worth 7.2trillion VND of Hung Yen Urban Investment and Development Company Limited,followed by a release of 4.7 trillion VND worth of bonds of Nam An Investmentand Trading JSC and nearly 4.7 trillion VND worth of bonds of Southern StarUrban Development and Trading Investment JSC.
The banking industry also witnessed active issuance activity inthe last quarter with a value of 19.8 trillion VND, accounting for 55% of thetotal issuance value.
In the first half of the year, ten banks mobilised 20.2 trillion VNDof bonds at a rate of 31%. The weighted average maturity of bank bonds is 4.02%per year, while the average interest rate is 7.5%.
Techcombank, TP Bank, HDBank, and Orient Commercial Joint StockBank (OCB) were among the largest bank bond issuers during the period.
In the second quarter, businesses, especially the banking sector,accelerated the purchase of corporate bonds before maturity.
So far this year, the total value of bonds bought back beforematurity by businesses reached more than 115.4 trillion VND, up 48% over thesame period in 2022.
Negotiation is key
According to the Hanoi Stock Exchange (HNX), as of July 13, thevalue of deferred corporate bonds is about 44 trillion VND. Of which, onlyabout 18 trillion VND has been negotiated by the issuers with the bondholder,including swapping with other assets, extending, and changing conditions andterms.
Pressure on mature corporate bonds is rising in the last twoquarters, while many issuers continue to struggle with company operations andcash flow, according to VNDirect Securities Corporation.
As a result, negotiations to extend the maturity of bonds isone of the best solutions for issuers to have more time to recover theirproduction and business and build enough cash flow to pay back theirdebts, the securities firm added.
In 2023, VNDirect estimates the value of maturing corporatebonds at about 223.4 trillion VND, an increase of 45.6% year-on-year.
In the third quarter, more than 75.9 trillion VND of corporatebonds will mature, up 14.9% over last year.
New corporate bond exchange
The private placement of corporate bonds trading system wasformally launched on July 19.
Within three months, around 1,200 private bond issuancesworth 1 quadrillion VND will be listed on the platform.
However, the liquidity of the system in the first trading week waspoor with a value of just 2 trillion VND. And it is expected tobe unable to improve immediately due to a time lag when all bond codes wererequired to register for trading and comply with legal regulations.
Can Van Luc, chief economist at BIDV and member of the NationalFinancial and Monetary Policy Advisory Council, believed transactions on thetrading system will improve shortly.
"The system is newly opened, so it takes time for investorsto learn about it. I think in the near future, when more investors know aboutthe system and see its benefits and the exchange runs smoothly, then it willcertainly be better," Luc told VietnamNews./.
VNA
