More companies reported delaying paying principal and interest on bonds in the second quarter, with a total outstanding payment of nearly 24.3 trillion VND (1.02 billion USD) due.
For the first six months of the year, about 82 firms reported late or delayed payment of bond principal and interest, bringing the total estimated value of deferred bond payments to 183 trillion VND (7.71 billion USD), representing 17% of the total market for corporate bonds in the country.
The real estate business accounted for around 73% of the total delayed payments.
The corporate bond market, on the other hand, showed signs of recovery in the second quarter, particularly in June, with more than 30.6 trillion VND in bonds issued.
For the first half of 2023, nearly 65.3 trillion VND worth of bonds were released, a decline of 65% over last year. This is a tough time for the market, as the issuance value has fallen sharply in the last five years.
During the period, the weighted average maturity of mobilized bonds was 3.79 years, while the average deposit interest rate was 10.1%, higher than the 2022 average rate of 7.9%.
The real estate sector recorded the highest issuance value in the first six months of 2023, accounting for more than 50% of the total value of issued bonds since the beginning of the year.
Notable issuances from the property developers were a batch worth 7.2 trillion VND of Hung Yen Urban Investment and Development Company Limited, followed by a release of 4.7 trillion VND worth of bonds of Nam An Investment and Trading JSC and nearly 4.7 trillion VND worth of bonds of Southern Star Urban Development and Trading Investment JSC.
The banking industry also witnessed active issuance activity in the last quarter with a value of 19.8 trillion VND, accounting for 55% of the total issuance value.
In the first half of the year, ten banks mobilized 20.2 trillion VND of bonds at a rate of 31%. The weighted average maturity of bank bonds is 4.02% per year, while the average interest rate is 7.5%.
Techcombank, TP Bank, HDBank, and Orient Commercial Joint Stock Bank (OCB) were among the largest bank bond issuers during the period.
In the second quarter, businesses, especially the banking sector, accelerated the purchase of corporate bonds before maturity.
So far this year, the total value of bonds bought back before maturity by businesses reached more than 115.4 trillion VND, up 48% over the same period in 2022.
Negotiation is key
According to the Hanoi Stock Exchange (HNX), as of July 13, the value of deferred corporate bonds is about 44 trillion VND. Of which, only about 18 trillion VND has been negotiated by the issuers with the bondholder, including swapping with other assets, extending, and changing conditions and terms.
Pressure on mature corporate bonds is rising in the last two quarters, while many issuers continue to struggle with company operations and cash flow, according to VNDirect Securities Corporation.
As a result, negotiations to extend the maturity of bonds is one of the best solutions for issuers to have more time to recover their production and business and build enough cash flow to pay back their debts, the securities firm added.
In 2023, VNDirect estimates the value of maturing corporate bonds at about 223.4 trillion VND, an increase of 45.6% year-on-year.
In the third quarter, more than 75.9 trillion VND of corporate bonds will mature, up 14.9% over last year.
New corporate bond exchange
The private placement of the corporate bonds trading system was formally launched on July 19.
Within three months, around 1,200 private bond issuances worth 1 quadrillion VND will be listed on the platform.
However, the liquidity of the system in the first trading week was poor with a value of just 2 trillion VND. And it is expected to be unable to improve immediately due to a time lag when all bond codes were required to register for trading and comply with legal regulations.
Can Van Luc, chief economist at BIDV and member of the National Financial and Monetary Policy Advisory Council, believed transactions on the trading system will improve shortly.
"The system is newly opened, so it takes time for investors to learn about it. I think shortly, when more investors know about the system and see its benefits and the exchange runs smoothly, then it will certainly be better," Luc told Vietnam News.