Property giants grapple with bond defaults amid liquidity crunch

Property giants grapple with bond defaults amid liquidity crunch

The wave of defaults underscores persistent liquidity strains within the property sector and signals that investor confidence remains fragile.

A construction site of an apartment on Võ Văn Kiệt Street, Bình Tân District, HCM City. — VNA/VNS Photo

The corporate bond market in Việt Nam is showing renewed signs of distress as major real estate developers find themselves unable to meet payment obligations on maturing bonds.

This wave of defaults underscores persistent liquidity strains within the property sector and signals that investor confidence remains fragile.

Recently, Nova Saigon Royal, a subsidiary under the Novaland ecosystem, disclosed its inability to fully settle a VNĐ1 trillion (US$38.2 million) bond (NSRCH2223001) issued in 2022.

By the June 17 deadline, the company had managed to repay only VNĐ5 billion of the approximately VNĐ936 billion principal due, and still owed VNĐ51 billion in interest, attributing the shortfall to ongoing negotiations and unarranged funding.

Despite Nova Saigon Royal posting a profit after tax of VNĐ265 billion in 2024, with retained earnings of nearly VNĐ1.1 trillion, the company remains heavily reliant on bond financing. Its total liabilities stood at over VNĐ1.41 trillion, of which VNĐ946 billion came from bonds and the remainder from other payables, with zero bank debt on record. 

Likewise, BNP Global failed to service a VNĐ2.1 trillion bond issuance by the June 4 deadline. After partial repayments, the company still bears over VNĐ1.2 trillion in principal, again citing liquidity constraints as the primary hurdle. 

These are not isolated cases. Data from Viet Dragon Securities Corporation (VDSC) reveals that about VNĐ53.6 trillion in corporate bonds were overdue as of May, with real estate issuers accounting for nearly 60 per cent of the total.

The ripple effect of these unpaid bonds poses a systemic threat. 

Việt Nam's reliance on corporate bonds as a funding channel, notably during the 2020–2021 boom, is being challenged amid weakening sales cash flow and tepid investor sentiment. 

VIS Rating reports that between June and year-end, around 474 bond issuances, totalling VNĐ150 trillion, are due, with half attributable to real estate firms and 26 issuances flagged as at risk of initial default.

In light of the corporate bond market's inability to regain its appeal, the increasing frequency of late payments and defaults has made individual investors more cautious. Many bondholders are still awaiting timely interest payments, with some even having their debts converted into less liquid assets, such as real estate products.

The continuous failure of numerous real estate companies, some of which were previously rated highly, to fulfil their payment commitments poses a significant challenge to the efforts of regulators and stakeholders aimed at restoring market confidence.

Regulatory intervention has been introduced to mitigate systemic risk. The Government has encouraged debt extensions and corporate restructuring to ease pressure on cash-strapped issuers. However, experts caution that these measures only delay the fundamental challenge: weak cash generation and unsustainable financial models. 

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