According to estimates by Vietnam Investment Credit Rating Joint Stock Company (VIS Rating), in August 2024, about VND 7,300 billion out of VND 18,600 billion of maturing bonds with high risk of not being able to repay principal on time, mainly from the residential real estate and energy sectors.
In 2024, about VND40,000 billion of high-risk bonds will come from 35 issuers, mostly real estate and construction businesses.
VIS Rating commented that these enterprises have very weak debt repayment capacity, shown by a very high debt-to-equity ratio, a shortage of cash resources over the value of matured bonds, and low profit margins before tax, depreciation and interest compared to other issuers.
For example, in the case of Hano-vid Company, according to information published in the first half of 2024, the debt/equity ratio increased from 4.42 in the first half of 2023 to 6.77 times in the first half of 2024, corresponding to a debt of nearly 34 trillion VND.
The bond debt/equity ratio decreased slightly from 1.83 times in the first half of 2023 to 1.81 times in the first half of 2024, equivalent to a bond debt of nearly VND9.6 trillion. However, Hano-vid's after-tax profit is often modest, especially compared to the size of its equity. Hano-vid's after-tax profit in the first half of 2024 reached VND7.8 billion, down 80.7% year-on-year.
Notably, the report on principal and interest payments for the first half of 2024 shows that Hanoi-vid is paying interest on 182 issued bonds with a total face value of VND9,654.6 billion. The term of these bonds is about 5-7 years, most of them are unsecured and Maritime Bank (MSB) is the depository.
The same is the case with Trung Minh New Urban Area Company Limited. In the first half of 2024, the company's equity was VND 138.7 billion, down 13.4% over the same period last year.
Notably, the debt/equity ratio increased from 9.84 times in the first half of 2023 to 31.16 times in the first half of 2024, equivalent to a debt of VND 4,321.8 billion. Bond debt/equity also increased sharply from 1.87 times in the first half of 2023 to 21.62 times in the first half of 2024, equivalent to a bond debt of VND 2,998.7 billion.
Trung Minh New Urban Area Company continued to record negative after-tax profit, with a negative VND18.1 billion in the first half of 2024, while the after-tax loss was VND3.4 billion in the first half of 2023. Previously, the company also reported after-tax losses in 2022 and 2023 with losses of VND9.1 billion and VND6.7 billion, respectively.
According to VIS-Rating, it is worth noting that 17 out of 35 high-risk issuers (accounting for about 61% of the value of bonds with a risk of late principal/interest payments) are enterprises established solely for the purpose of raising capital, while having almost no revenue and cash flow from business operations. In the next 12 months, about 20% of the total value of VND259,000 billion will mature with a high risk of late payment. 90% of them have missed coupon payments at least once and are highly leveraged and have low cash resources.
