Solutions for enterprises to relieve pressure from bond maturity

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Experts speak at the workshop. Photo: N.H

Mr Ha Khac Minh, Editor-in-Chief of Corporate Finance Magazine, said that violations in the issuance of corporate bonds lose investors' trust. In addition, this decreases new bond issuance and surges early bond redemption. Furthermore, the general difficulties of the real estate sector and negative information in the financial market related to some large corporations and enterprises also limit the bond capital mobilization channel.

Economic expert Dinh The Hien said that, from March 2022, the corporate bond market slowed to wait for the revised Decree 153/ND-CP/2020, aiming at protecting the legitimate interests of investors and improving the quality of capital markets. Notably, Vietnam corporate bonds in 2022 focus on banks and real estate businesses. Therefore, recusing the corporate bond market means rescuing bonds of real estate businesses

Lawyer Pham Ngoc Hung, Vice Chairman of the HCM City Business Association, said that the key reason investors lose their trust in corporate bonds is that issuers provide false information about corporate bonds, the quality of the collateral is limited, and there is a lack of collateral. In addition, some enterprises neither obtain approved bond issuance plans nor have financial statements for the preceding issuance year audited by an audit organization.

Besides, the brokerage role of banks and securities companies should be reviewed. Even many brokers have operated without being permitted by competent authorities.

The bond offers fail to comply with the regulations and have not provided accurate information about the bond issuer. In addition, some consulting units and issuance agents have supported ineligible investors in buying privately placed corporate bonds to raise capital.

Mr Ma Thanh Danh, Chairman of International Consult CIB Joint Stock Company - also said that enterprises suffer from great pressure on bond maturity, partly caused by securities companies and banks

"To sell bonds, the bond offers promise investors to repurchase the bonds within 3-6 months after the issuance. Until the bondholders request the redemption, the offers refuse the redemption or cannot afford to make the redemption. But if this responsibility is pushed to the issuers, it does not comply with the regulations because the issuance term is usually at least one year, "- Danh said.

Facing the pressure of bond issuers, Mr Ma Thanh Danh provided some solutions. Specifically, the bond issuers should list the remaining assets. Then, if good-making issuers are requested for redemption by bondholders, they can use cash to buy, helping reduce the pressure. On the other hand, if the issuers cannot afford that, they can borrow or mortgage a part of the bond with a higher interest rate to repurchase the bonds.

If the operation is stable, the issuers can negotiate directly with bondholders to wait for maturity. If the bondholder strongly requests the redemption, the issuers can propose to the bondholders to transfer the bond into shares. Citi Bank has agreed to shift Novaland bonds into NVL shares at the price of 85,000 VND/share, while the NVL price is just over 20,000 VND/share.

For issuers with insufficient finance or weak business operation, the requirement for redemption is incredibly pressured. Therefore, they must prepare a specific corporate restructuring plan to negotiate with the bondholders. Then, they must sell their assets to pay the bondholders if the negotiation fails. They can be the land, trade mark, or distribution system.

The second solution Mr Ma Thanh Danh suggested is seeking solutions from other markets, such as the stock market. "Recently, the cash flow may increase after the stock market have seen consecutive drops. The issuers may mobilize capital through this market to pay for bonds. They may even sell some treasury shares to recover money," said Mr Danh.

The issuers also should take the debt trading market into account. However, debt trading tools in the Vietnam market have not yet been familiar. If there is an effective secondary bond market, bondholders who need to resell the bonds may directly sell bonds on this market, reducing pressure on the issuers.