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Real estate businesses return to the bond channel
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 Viet Nam Bond Market Association (VBMA) shows that in May 2022, real estate businesses have begun to return to find capital on the bond channel and accelerate bond issuance in June. In May, realty businesses issued a total of nearly VND6.9 trillion (US$294.6 million) of bonds, then in June, the figure was more than VND7.5 trillion.
In May, Long Thanh Riverside Joint Stock Company issued VND105 billion, An Gia Real Estate Development and Investment Joint Stock Company issued VND300 billion and My Phu Real Estate Trading and Investment Co Ltd issued VND700 billion.
Multiple resort real estate enterprises also issued bonds to mobilise capital in May, including Phu Quoc Tourism Development and Investment Joint Stock Company, issuing corporate bonds worth VND717.2 billion; Sunbay Ninh Thuan Joint Stock Company issuing corporate bonds to mobilise VND900 billion.
In June, Hung Loc Real Estate Investment Joint Stock Company issued VND150 billion of bonds; Nam Long Investment Joint Stock Company issued VND500 billion and Novaland Group issued more than VND2 trillion.
It is estimated that from the beginning of this year to the end of June, real estate businesses issued a total of VND152.4 trillion of bonds, of which more than 94 per cent 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 positive source of capital supporting businesses when bank credit is not enough.
The bond channel plays a positive role because this is still a large capital flow, supporting businesses when bank credit is not enough.
Bond offering in private placement requires a credit rating, which is an independent third-party assessment of the level of risk, Thuan said.
Talking to the Bao Dau Tu (Investment Review), a financial director of a large real estate enterprise in HCM City said that controlling bond credit channels is necessary, but not a sustainable solution.
“A sudden brake on the bond channels that flow to real estate can create many consequences. In the short term, it causes the market's liquidity to decrease, businesses do not dare to expand investment, causing a scarcity of supply and pushing up real estate prices,” he said.
KB Securities Viet Nam 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 of convertible bonds and bonds with warrants to foreign partners, Dat Xanh Group is expected to complete the issuance of $300 million of international convertible bonds in the third quarter of 2022.
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