Mai Ngoc Chau and Nguyen Dieu Tu Uyen, Bloomberg News
Cranes stand next to residential buildings under
construction in Hanoi, Vietnam, on Tuesday, Sept. 11, 2018. The nation of 96
million people has embraced free-market reforms over the past few decades,
leading to surging growth under an authoritarian one-party Communist government
that offers the same political stability as China. Photographer: Maika
Elan/Bloomberg , Bloomberg
(Bloomberg) -- Vietnam’s
property debt crisis is intensifying as the country’s second-largest developer
joined the ranks of peers seeking debt extensions after failing to repay a bond
on time.
No Va Land Investment
Group said earlier this week it will delay repayment of a 1 trillion dong ($42
million) note originally due on Feb. 12 and asked holders for an extension or
to convert the principal into its real estate products. The developer said it’s
seeking to work out a way within two months for it to pay off the debt.
Better known as
Novaland, the company is a prominent addition to an expanding group of
Vietnamese companies tardy with their bond payments. Fifty-four companies —
many of them in the real estate sector — were late as of Jan. 31, up from six
the month before, the Hanoi Stock Exchange said.
That suggests the cash
crunch in the real estate sector is worsening after an anti-graft campaign
spooked investors and new bond issuance plunged. With billions of dollars of
bonds due this year, the industry’s woes risk triggering a broader crisis for
the nation’s banking sector and economy.
“We believe this is just
the beginning, and expect more debt extensions, restructurings and defaults,”
said Xavier Jean, an analyst at S&P Global Ratings. “We are also watching
for contagion effect” that could spill over to companies beyond the
construction sector, he said.
The Southeast Asian
nation’s property crisis started last year after officials issued a crackdown
on corporate bond issuance following allegations of illegal activities, setting
off a series of actions to rectify the property market. That included
high-level arrests, inspections of brokerages tied to canceled issuances and an
overhaul of the bond industry.
Real estate firms have
130 trillion dong of bonds maturing this year, according to a trade ministry
publication last week citing estimates by the Ho Chi Minh City Real Estate
Association.
Prior to Novaland’s
latest announcement, industry peers Tan Hoang Minh Group, Van Thinh Phat
Holdings Group and Sunshine Group had also sought to extend bond payment
deadlines, according to Hanoi Stock Exchange data.
Novaland’s shares fell
1.7% on Thursday, after plunging 6.6% the previous day.
Vietnam’s Ministry of
Finance proposed a decree amendment that would let companies extend corporate
bond maturities by as long as two years to ease a funding shortage, a local
newspaper reported in December. The draft revision, which has been submitted to
the government, also includes allowing bond principal and interest to be
converted into loans or other assets, according to the trade ministry’s
publication last week.
“What will happen next -
and whether cross default contagion is to occur or not - will remain as the big
concern to the market right now,” according to an investor note by SSI
Securities Corp. Wednesday. “What is a must right now is for the issuer to
convene a bondholders’ meeting to discuss solutions, including redemption, further
guarantees, or a waiver of default.”
--With assistance from
Nguyen Kieu Giang.
(Updates with number of
companies late on bond payments from third paragraph, stock price)
©2023 Bloomberg L.P.
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