Real estate businesses return to bond channel

Real estate businesses return to bond channel, Illustrative image (Source: VNA)

Hanoi - Many real estate businesses have returned to the bond channel to raise capital after an absence in April, mobilising thousands of billions of Vietnamese dong.

Data of the Vietnam Bond Market Association (VBMA) shows that in May, real estate businesses began to return to find capital on the bond channel and accelerate bond issuance in June. In May, realty businesses issued a total of nearly 6.9 trillion VND (294.6 million USD) of bonds, then in June, the figure was more than 7.5 trillion VND.

It is estimated that from the beginning of this year to the end of June, real estate businesses issued a total of 152.4 trillion VND of bonds, of which more than 94% were issued privately. Also during this period, VBMA said real estate was the group of enterprises with the second highest bond issuance volume, after commercial banks.

According to experts, bonds still account for a large proportion of the capital used for projects of real estate enterprises, especially in the context that bank credit is under tight control.

According to Nguyen Quang Thuan, Chairman and General Director of FiinGroup Joint Stock Company, the State Bank has recently moved to tighten real estate credit to limit speculative activities and help the market become more transparent. The policy of tightening credit makes it difficult for people and investors, especially real estate businesses, to access loans from banks.

In this context, realty businesses try to diversify and perfect the channels to mobilise capital for investment.

Thuan said the bond channel was a good source of capital supporting businesses when bank credit is not enough, adding that bond offering in private placement requires a credit rating, which is an independent third-party assessment of the level of risk.

KB Securities Vietnam Joint Stock Company (KBSV) said in the context of strict control of credit in the real estate sector and strict supervision of corporate bond issuance, real estate businesses will find it more difficult to raise capital in the next few quarters.

In addition to the two traditional capital mobilisation channels, which are credit and domestic bonds, listed real estate enterprises have also diversified their sources of capital, accessing new channels such as investment funds, mergers and acquisitions (M&A) and international joint ventures.

For example, Novaland Group recently completed the sale of 250 million USD of convertible bonds and bonds with warrants to foreign partners. Dat Xanh Group is expected to complete the issuance of 300 million USD of international convertible bonds in the third quarter of 2022.