A series of real estate enterprises issue bonds ten times higher than charter capital

Ten times the charter capital

Bach Hung Vuong Joint Stock Company has a charter capital of only VND 200 billion but has just finished issuing VND 2,980 billion of bonds with a term of 12 months. Bach Hung Vuong is an enterprise owned by Mrs. Dinh Thi Ngoc Thanh – Chairman of the Board of Directors of Bong Sen Corp as General Director cum legal representative and owns 75% of the capital at the time of establishment. Notably, information about the interest rate, issuance purpose, collateral, bondholders, and arrangement for the bond lot of Bach Hung Vuong was not disclosed.

At the end of August 2021, Bong Sen Corp issued two lots of bonds with a total value of 4,800 billion VND to restructure debt. Bondholders are 12 domestic institutions, including one credit institution and two securities companies. In 2019, Bong Sen Corp issued VND 7,350 billion of bonds to securities funds and companies.

A series of businesses continue to issue bonds with many zeros.

Similarly, Phuc Khang Dong Saigon Co., Ltd. has a charter capital of VND 250 billion but has successfully issued a bond lot worth VND 700 billion. Bonds offered for sale are non-convertible bonds, without warrants, secured by assets and are not secondary liabilities of the issuer. Similarly, Phuc Khang Investment Management Company Limited (PKIM) also issued VND500 billion of 4-year bonds but the list of bondholders was not announced. Previously, Phuc Khang Corp mortgaged the entire contributed capital owned by PKIM which was valued at VND 374.5 billion at TPBank.

From 2019 to now, Phat Dat Real Estate Development Joint Stock Company has also actively mobilized capital through bonds with high interest rates. In 2021, Phat Dat issued 9 bonds with a total value of 2,305 billion VND. Most of the bond lots have an interest rate of 12-13%/year, maturing in 2023.

Similarly, Bamboo Capital Joint Stock Company announced its financial statements for the first quarter of 2022 with a total debt of more than VND 15,100 billion, an increase of about 12% compared to the beginning of the year, mainly long-term loans. In which, the outstanding short-term and long-term bonds of this enterprise is more than 9,097 billion dong. Notably, the current charter capital of Bamboo Capital is more than VND 2,975 billion.

A member of Bamboo Capital’s ecosystem, R&H Group Joint Stock Company, also continuously issued 7 lots of bonds with a total value of up to VND 8,150 billion. The purpose of mobilizing bonds is for the development of real estate projects, but the name of the project is not specified. R&H Group Joint Stock Company was established in August 2019, with a charter capital of VND 1,450 billion.

In the first quarter of 2022, Dat Xanh Group recorded net revenue of VND 1,792 billion, down 39.3% compared to the same period last year. Dat Xanh’s liabilities still remain at VND 14,900 billion. However, this enterprise is planning to issue a convertible bond with a value of USD 300 million to a strategic partner with a term of 5 years.

An Gia Real Estate Development and Investment Joint Stock Company also approved the resolution to issue a maximum of about 300 billion VND.

Similarly, An Gia Real Estate Development and Investment Joint Stock Company also passed a resolution to issue individual corporate bonds in 2022. Accordingly, the maximum total issuance volume is about 300 billion VND. This is a non-convertible bond, without warrants and secured by assets. Bond maturity is 24 months from the date of issue.

Too much risk

According to the Vietnam Bond Association, in the first quarter of 2022, there were 48 individual corporate bond issuances with a total value of about VND 30,998 billion and 9 issuances to the public with a value of VND 8,696 billion. The total value of bond issuance to the public increased by 13.78% over the same period last year and the value of private bond issuance decreased by 24.17%, reaching VND 30,998 billion. Real estate is currently leading in issuance value with a total issuance volume of 17,211 billion dong, accounting for 43.36%.

In the first quarter of 2022, there were 48 separate issuances of corporate bonds with a total value of about VND 30,998 billion and 9 issuances to the public with a value of VND 8,696 billion.

A recent report on the corporate bond market of the Vietnam Real Estate Brokers Association (VARS) shows that corporate bonds in real estate have grown continuously in the past few years as investors prioritize using the form of capital mobilization through the issuance of bonds rather than capital sources from banks or investors, customers. As of mid-April 2022, the total value of corporate bonds issued reached nearly 40,000 billion VND.

However, what makes management agencies concerned about real estate bonds is that enterprises use bonds for improper purposes, leading to risks for bondholders; business enterprises at a loss, information to bondholders is not complete and transparent…

Talking to Tien Phong, Mr. Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association (HoREA) said that recent cases have revealed shortcomings, especially mechanisms and policies being taken advantage of. That is the lack of information transparency, lax issuance conditions, improper use of capital, round-trip capital transfer, financial adequacy ratio, rating criteria… of the issuer are not good. Along with that is the lack of supervision, inspection and management by the governing body and related agencies and organizations and there are still legal gaps to manage and supervise the market. Many individual investors do not fully understand the law on investment and trading in corporate bonds.

According to TPO