Real estate businesses run out of options to issue bonds en masse?

From August 1, the Law on Real Estate Business 2023 takes effect. One of the important contents of this law is the regulations on the capacity of investors of real estate projects.

Decree No. 96/2024 detailing and guiding the implementation of a number of articles of the Law on Real Estate Business, newly issued by the Government, has clarified this further. Specifically, Articles 5 and 6 of Decree 96 provide details on capital mobilization for project implementation and equity capital of real estate enterprises.

Outstanding loans do not exceed 4-5.67 times equity

Decree 96 stipulates that the credit balance and debt to equity ratio of real estate businesses must ensure three things.

Firstly, meet the financial safety ratios of the enterprise, comply with the provisions of the law on credit and the law on corporate bonds.

Second, in case a real estate business borrows from a credit institution and issues corporate bonds to implement a real estate project that has been approved by a competent state agency as an investor, it must ensure that the total outstanding loan balance at the credit institution, outstanding corporate bond balance and required equity capital according to regulations for each project does not exceed 100% of the total investment capital of that project.

Third, the total ratio of outstanding loans at credit institutions and outstanding corporate bonds to implement the project must not exceed 4 times the enterprise's equity for each real estate project with a land use scale of less than 20 hectares and must not exceed 5.67 times the equity for each real estate project with a land use scale of 20 hectares or more.

Equity is based on the financial statements or audited equity reporting results performed during the year.

In case at the prescribed time the enterprise does not have audited financial statements or reports on equity items, the audited financial statements or reports on equity items of the previous year shall be used.

For enterprises established and operating for less than 12 months, equity is determined according to contributed charter capital according to the provisions of law.

A residential area in Hanoi (Photo: Tran Khang).

Late payment of corporate bond debt continues to increase

In a recent analysis report, VnDirect Securities Company assessed that although the real estate market has broken through the bottom, the market is still gloomy. In the context of many difficulties, many issuers, especially real estate enterprises, are still facing cash flow difficulties, leading to delays in payment of debt obligations on maturing bonds.

As of July 15, there were about more than 80 enterprises on the list of late payment obligations for interest or principal of corporate bonds according to the announcement of HNX.

The total amount of principal due in the first 6 months of the year that was overdue and the value of bonds with a maturity of 6 months that had their maturity extended was about VND43,500 billion, accounting for 43.5% of the total maturity value in the first half of the year, and accounting for 62% of the total maturity value when excluding the banking group.

This unit estimates the total outstanding individual bonds of these 80 enterprises to be about 190,000 billion VND, accounting for about 18.7% of outstanding individual corporate bonds in the whole market. Most of these issued bonds are from real estate enterprises.

Source: https://dantri.com.vn/bat-dong-san/doanh-nghiep-bat-dong-san-het-cua-phat-hanh-trai-phieu-o-at-20240805133132629.htm