Late payment of principal and new interest

According to VIS Rating, in May 2024, there was a bond announced as being late for the first time with a total face value of VND 1,000 billion issued by Sunshine House Trading Joint Stock Company.

This bond, which had an original maturity date of May 13, 2024, was approved by most bondholders for a 24-month extension on April 12, 2024. However, some bondholders holding VND87 billion in face value did not agree to the extension.

The issuer also received approval from the majority of bondholders not to liquidate the collateral in case of late payment. The issuer announced that it had paid VND 112.5 out of VND 117.3 billion in bond interest on May 13, 2024. However, the issuer has not paid VND 87 billion in bond principal that has not been extended. This case is classified by VIS Rating as late payment of both principal and interest.

The rate of overdue bonds in the entire market at the end of May 2024 was 16.1%, an increase of 1% compared to the end of 2023. About 65% of the amount of overdue bonds for principal/interest came from the residential real estate sector, with the rate of overdue principal/interest payments of this sector alone being 31%.

The recovery rate for overdue bonds across the market remained unchanged from the previous month, except for the residential real estate group. The recovery rate for this sector decreased to 10.9% as of the end of May 2024 due to the increase in the value of overdue bonds in principal/interest this month.

Risk of late payment increases

About VND6.9 trillion of bonds maturing in June 2024 are at risk of not being able to repay the principal on time.

VIS Raing estimates that VND6.9 trillion of bonds maturing in June 2024 are at risk of not being able to repay the principal on time.

In June 2024, 41 bond codes from 34 issuers worth VND23 trillion will mature. Of which, VIS Rating estimates that about VND6.9 trillion, equivalent to 30%, is at risk of late principal/interest payment in June 2024.

Of the VND6.9 trillion worth of high-risk bonds, about VND5.8 trillion, mainly issued by DCT Partners Vietnam, Ngoc Minh Investment and Real Estate, Nova Real Estate Investment Group and Hung Thinh Land, has delayed coupon payments in 2023.

According to VIS Raing, these issuers are likely to delay principal repayments due to weak cash flows and depleted cash resources.

The remaining 1.1 trillion VND of bonds with high risk of first-time late payment belong to issuers in the residential real estate industry group.

VIS Rating notes that these issuers have average EBITDA margins of less than 10% or even negative over the past three years and have exhausted their cash resources to pay off maturing debt.

About 19% of outstanding bonds worth VND216 trillion (US$9.6 billion) will mature in the next 12 months. VIS Raing estimates that 9% of these are bonds with a high risk of default, mainly in the residential real estate and construction sectors.

New releases continue upward trend

Meanwhile, the amount of new corporate bonds issued in May 2024 was VND28 trillion, higher than the VND19.2 trillion in April 2024. Most of the new issuance in April 2024 came from the banking sector. Accumulated from the beginning of the year, the amount of new issuance reached VND67.1 trillion, an increase of 93% over the same period last year.

In particular, Vingroup Corporation-CTCP continues to issue bonds in May 2024 with a total issuance value of VND8 trillion. The 2-year term bonds issued by this corporation are callable, unsecured, non-convertible and unsecured bonds with a coupon rate of 12.5%. In the past 2 months, Vingroup Corporation-CTCP has issued VND8 trillion in bonds, completing the announced 2024 plan.

Of the bonds issued by the banking group in May 2024, 30% were subordinated debt bonds, while 70% were priority debt bonds. The subordinated debt bonds issued by the Military Commercial Bank and the Vietnam Joint Stock Commercial Bank for Investment and Development have an average maturity of 9.3 years and interest rates of 5.8% - 6.5% in the first year, higher than other priority debt bonds issued by other banks with a maturity of 3 years and fixed interest rates of 3.9% - 5.4%.

Thu An