Bustling issuance of convertible bonds to restructure debt

Issuing convertible bonds has become a favorite capital mobilization channel for many listed enterprises in the first half of this year.

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According to the offering plan, July 16 is the deadline to receive money from investors in the convertible bond issuance of Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII). This enterprise is offering 20 million convertible bonds (code CII425001) to the public, with the goal of mobilizing 2,000 billion VND to restructure debt.

The above-mentioned CII convertible bonds have a term of 10 years, with 9 conversions implemented annually from the beginning of 2027. The conversion price is 12,500 VND/share, nearly 20% lower than the current market price. The bond interest rate is a combination of fixed and floating. At the annual General Meeting of Shareholders, CII General Director Le Quoc Binh said that the Company issued convertible bonds with the expectation that the profit rate of the investment project would be higher than the mobilization interest rate.

Issuing convertible bonds has become a preferred capital mobilization channel for a series of listed enterprises in the first half of this year, all with the aim of restructuring debts. Most recently, TCO Holdings (code TCO) completed the issuance of VND260 billion in individual convertible bonds, with a term of 1 year and a fixed interest rate of 9%/year. The bond buyers are two existing shareholders.

The above-mentioned rice industry enterprise mobilized capital to pay off personal loans in advance to buy the Enterprise Tower office building with 2 basements and 15 floors. These loans are expected to mature in June-July 2026, all with quite high interest rates, commonly at 10%/year.

Notably, many organizations are targeting existing shareholders for issuance. Thanh Thanh Cong - Bien Hoa Joint Stock Company is embarking on a public offering of nearly 5 million convertible bonds worth VND500 billion, with a fixed interest rate of 9.5%/year and a term of 1 year. The entire proceeds will be used to pay off the loan to its subsidiary (Bien Hoa Consumer Goods Joint Stock Company).

The right to purchase bonds will be allocated to existing common stock holders at a ratio of 16.291:100. Upon maturity, the bonds can be converted into common stock with no transfer restrictions at a price equal to 80% of the average closing price of SBT shares in the 30 trading sessions immediately preceding the date of issuance of the shares.

Recently, Ba Ria - Vung Tau Housing Development Joint Stock Company (Hodeco, code HDC) also planned to mobilize nearly 500 billion VND from shareholders through issuing convertible bonds to existing shareholders in 2025. The conversion price is 10,000 VND/share. The fixed bond interest rate is 10%/year, with a term of 2 years.

Shareholders owning 35,671 shares are entitled to buy 1,000 bonds with a face value of VND100,000/bond. The bonds will be converted into shares in two installments at the 1-year mark (40%) and on the bond's maturity date. Hodeco said it will use the above capital to pay off loans at many banks.

Temporarily delay dilution pressure

Issuing convertible bonds is essentially a hybrid capital mobilization channel between debt and equity capital mobilization. In the case of Hodeco, this enterprise can reduce short-term payment pressure and restructure debt. Along with that, the ability to convert into equity capital in the future instead of immediately issuing shares also helps enterprises temporarily reduce dilution pressure, especially when business activities next year face many challenges.

“In the period 2025 - 2027, through its subsidiary Nam Bay Bay Investment Company, CII will invest in two real estate projects, NBB II and III. After these two projects are completed, the Company will continue to put the Trung Luong - My Thuan Expressway Project into operation. The Company has a short-term game for real estate projects and a long-term game for a sustainable and effective portfolio,” CII leaders once said about the projects aimed for in the near future.

In 2025, TCO Holdings set out a fairly cautious business plan, with a revenue target of VND 3,000 billion and after-tax profit of VND 44 billion for the 2025 fiscal year starting from January 1, 2025 to September 30, 2025.

In addition to the reason that this fiscal year only has 9 months, at the 2025 Annual General Meeting of Shareholders, the Company's Board of Directors also acknowledged that the rice industry this year faces many challenges, from sharp declines in rice prices, stagnant exports to limited access to credit. Activities in drying, milling and polishing, TCO will also be affected when customers encounter difficulties.

CII is one of the few enterprises on the stock exchange that "prefers" the channel of issuing convertible bonds. As of December 31, 2024, the Company has outstanding debt of 2 convertible bond codes, CII424002 with outstanding debt of VND 2,811 billion and CII42013 with outstanding debt of nearly VND 15 billion. After the first quarter of the year, nearly VND 2,300 billion worth of bonds were converted at a conversion price of VND 10,000/share.

Also in the first quarter of 2025, CII's stock price only fluctuated around VND 14,000/share. During the sharp decline in early April 2025 due to the impact of information on the US's reciprocal tax policy, this stock was also among the most volatile when its price was near par value at times.

Of course, expectations of stock potential can still push the market price up. Four bondholders of Hai An Transport and Stevedoring Joint Stock Company (code HAH) agreed to convert 203 bonds code HAHH2328001 into more than 8.55 million HAH shares, with a conversion price of VND23,739/share, less than half of the closing price at that time. Thanks to expectations of second-quarter profit growth, HAH shares still broke out strongly in May and are currently anchored at a fairly high level (nearly VND70,000/share), bringing "sweet fruit" to bondholders who converted and continued to hold the shares.

Source: https://baodautu.vn/soi-dong-phat-hanh-trai-phieu-chuyen-doi-co-cau-lai-no-d331815.html