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Real estate bond issuance heats up
Amidst the market headwinds, several real estate developers with healthy operational records have secured large sums for project deployment through bond issuances.
On September 28, Nam Long Investment Group finalised the issuance of bonds with a term of five years valued at VND500 billion ($21.1 million) through a private placement.
This round of bonds has a coupon rate of 9.6 per cent per year for the first six months and was sold to a single owner – the Ho Chi Minh City-based commercial lender OCB. After the first six months, the coupon rate will be set by referencing OCB’s 12-month term deposit interest rate plus 2.5 per cent.
The land use rights for a 49-hectare plot in Ben Luc district in Long An have been put up as collateral.
Nam Long plans to use all the proceeds to expedite the Nam Long Central Lake Can Tho project in the Mekong delta region.
The project’s 1:500 scale detailed plans and its investment policy have already been approved.
On October 1, Khai Hoan Land also ratified the issuance of bonds through private placements with a total value of $35.4 million.
The birth of a separate corporate bond trading system in mid-July signalled a good start, helping to reboot the demand for corporate bonds.
The bonds are unconvertable, do not have any warrants attached, and are guaranteed by a credit entity.
Even though the capital use plan has yet to be unveiled, the company’s Board of Directors has assigned CEO Dinh Thi Nhat Hanh to finalise the bond issuance plan and pen a detailed strategy for the use of the proceeds that suits the business' operational needs and ensures the maximum benefit.
Nam Long and Khai Hoan Land are not the only entities to raise capital through the bond channel. In the third quarter alone, at least a dozen real estate firms were reported to successfully raise capital through bond issuances with private placements, reaching a total value of approximately $1.14 billion.
Meanwhile, in the first half of this year, the Vietnam Bond Market Association reported that real estate firms had raised nearly $1 billion from bond issuances.
During the period, Capitaland Tower Co., Ltd. raised the most, with four bond rounds valued at a total of $516.4 million. They all have a 60-month term, maturing in July 2028.
Capitaland Tower developed the premier mixed-use complex The Sun Tower Bason on over 6,000 square metres facing the Saigon River in Ho Chi Minh City’s District 1.
The Sun Tower Bason complex consists of five basements and 55 floors, with exceptional hanging gardens from the 35th to the 43rd floors.
Another major bond was issued by BIM Land, which successfully raised $98.4 million on August 31.
This round of bonds will reach maturity in July 2030 with a fixed coupon rate of 10.4 per cent annually.
As the bond volume can be bought back before maturity, either wholly or partially, by giving at least 30 days notice to the bond owners, BIM said that the bonds will be bought back gradually to coincide with yield payments.
Nguyen Quang Thuan, chairman of FiinGroup, a provider of financial data analytics platforms, business intelligence, and industry research services, believes that the bond market will develop strongly for the remainder of this year and into next, focusing on quality and correcting the previous shortcomings.
“Most of the issuance volume recently is earmarked for restructuring activities. Banks have excess capital and businesses are under significant pressure to repay debt, so there is a situation where banks and other organisations will step in to replace old bondholders,” Thuan stated.
Thuan also said that besides the above signals, the birth of a separate corporate bond trading system in mid-July signalled a good start, helping to reboot the demand thanks to institutional investors who have abundant capital and the need to diversify their portfolios.
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