Real estate developers resume capital flow

Novaland has been restructuring its finances, receiving much consensus from domestic and foreign partners. This includes nearly VND20.5 trillion ($854 million) of total outstanding debt from foreign loans, and Novaland's privately issued bonds have also reached agreement with lenders to be extended and have a solution plan.

The developer has completed restructuring its international convertible bond package, valued at $300 million, with the bond term extended to 2027.

From VND213 trillion ($8.9 billion) in debt, accounting for nearly 83 per cent of total capital in 2022, comprehensive restructuring efforts have yielded good results for Novaland.

In a recent announcement, Novaland said that by the end of June, the total outstanding debt had decreased by VND8.1 trillion ($338 million), equivalent to a decrease of 13 per cent compared to the end of 2022.

Similarly, An Gia, another real estate group, completed payment of all obligations related to a bond batch worth VND300 billion ($12.5 million) in May. As of the end of June, An Gia still had VND1.2 trillion ($52 million) in debt, keeping its debt per equity ratio as low as 0.4 times.

According to FiinGroup statistics, in the second half of 2024, it is estimated that about $5.8 billion of bonds will mature, of which the majority are real estate bonds (nearly $2.4 billion), equivalent to 42 per cent. This is also the bond group facing the greatest debt repayment pressure currently.

In the first half of 2024, the rate of late bond payments (including restructured and postponed corporate bonds) is nearly 18 per cent. Real estate is the industry with the largest scale of delinquent bonds, with a delinquent rate of up to 42.5 per cent.

However, the good news is that during this time, although the rate of problematic corporate bonds remains high, it has slowed compared to 2023.

Many businesses have tried to free up cash flow by issuing new batches of bonds with high-interest rates.

Khai Hoan Land Group has just successfully issued a batch of bonds worth VND250 billion ($10.4 million) with a fixed interest rate of 12.5 per cent per year for the first interest period.

According to the assessment of experts from VIS Rating, the ability to access new capital sources will be improved, helping to reduce liquidity difficulties due to the pressure of large debt maturities in the coming months.

Specifically, VIS Rating expects outstanding bank loans for real estate business to increase by 16 to18 per cent in 2024.

In addition, many listed real estate businesses announced plans to increase equity capital in recent shareholders' meetings. VIS Rating expects about VND26 trillion ($1 billion) of new equity capital to be mobilised for project development or repay due debt.

Efforts to reach swap agreements and debt extensions as well as capital rotation have helped real estate businesses have more resources to execute projects and bring products to market sooner.

For example, by the end of June, 14 out of 16 projects of Novaland were being implemented with a total limit of VND12.1 trillion ($504 million) and are being disbursed in stages. The total value of the projects, when completed and handed over, is estimated at nearly $20 million.

Similarly, after announcing that it had overcome the crisis cycle and paid all bond debt of more than $104 million last year, Phat Dat Real Estate Development JSC is focusing its efforts on implementing key projects.

According to the assessment of Dat Xanh Services Economic Financial and Real Estate Research Institute, the market in the second half is forecast to show positive changes.

Among those are investors' efforts to handle bad debt, increase equity to deploy new projects and promote sales to both collect money and increase market share. Realtors are expanding their human resources and diversifying their business activities to meet the demand of developers.

At the same time, the government continues to issue documents guiding the implementation of revised laws, strengthening market supervision and control, and creating a transparent and open investment environment. This promotes mergers and acquisitions, restructuring, and cooperation between entities participating in the real estate market.

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