A number of listed real estate firms have announced plans to issue convertible corporate bonds to seek capital as banks have tightened lending.
Ha Do Group (HDG) has decided to issue VND1.5 trillion worth of convertible corporate bonds, the value which is 50 percent higher than HDG’s charter capital.
Previously, HDG mostly used its own capital to do business. In 2014, the group’s short-term debt was VND50 billion and long-term debt VND1 billion.
However, the figure soared in following years. By the end of Q1 2019, short-term loans had reached VND1.003 trillion after climbing to $583 billion by January 1, 2019, and long-term loans VND3.229 trillion (VND2.059 trillion). Just within a short time, Ha Do kicked off a lot of projects which needed huge capital.
Dat Xanh Group (DXG) is going to pay dividends in stocks to be issued to existing shareholders with the price of VND10,000 per share.
Prior to that, DXG issued VND234 billion worth of convertible bonds. Like other real estate firms, DXG stated that the funds to be raised would be used to develop the land fund and improve the working capital.
Other realtors such as Novaland, Sai Gon Thuolng Tin Real Estate (SCR) and CII have issued unconvertible bonds since late 2018 with the value of VND1-2 trillion for each campaign.
The corporate bonds mostly have interest rates 2-3 percentage points higher than 12-month term deposit interest rates, and the interest is paid once every six months.
Some issuers fix interest rates for the first years, while the interest rates for the next years are calculated by the average 12-month term deposit interest rate of four banks (Vietcombank, VietinBank, BIDV and Agribank) plus margin.
Phat Dat Real Estate Development (PDR) is one of the biggest issuers. It has issued VND200 billion worth of bonds with the interest rate of 14.45 percent per annum.
Phat Dat bonds have a short term of one year, while the bonds issued by other firms are 3-5-year term, which shows Phat Dat’s urgent need for capital.
Insufficient capital is the burning issue of many real estate firms. The State Bank of Vietnam, in an effort to restrict the capital flow to the real estate sector, has cut the proportion of short-term capital banks can use for long-term lending.
The loans to fund house and apartment purchases are mostly 3-5-term loans. Some banks lend for 15 years to house purchasers. The proportion of long term (24-36 month term) deposits at banks is unprecedentedly low.
While some realtors warned the credit restriction would freeze the real estate market, thus affecting he economy, SBV said that this is necessary to ensure credit safety.
https://vietnamnet.vn/en/business/the-other-side-of-corporate-bonds-536377.html
