Under a new decree, issuers are now permitted to extend payments for up to two years and to pay with other assets if they fail to redeem the bonds on time. This replaces the previous term that prevented issuers from changing the terms of an issued bond.
A new decree has been implemented, allowing issuers of corporate bonds to extend payments for up to two years if bond holders agree.
The move came as some corporate bond issuers, particularly in the real estate sector, face liquidity difficulties and a crackdown that has seen the arrest of high-profile business executives and the tightening in September of rules on the trading of privately placed corporate bonds
However, if the bond holders disagree, issuers must renegotiate to ensure their rights are fulfilled or revert back to the original payment plan. Previously, issuers were unable to change the terms of an issued bond.
The new decree also permits issuers to negotiate with bond holders to pay with other assets if they fail to redeem the bonds on time, with approval from the bond holders. Additionally, the requirement for individual bond investors to have a stock portfolio of at least VND2 billion ($84,370) for at least 180 days has been removed, and the previous regulation mandating bond issuers to distribute their bonds within 30 days of announcing the issuance has been eliminated, giving issuers more time to search for potential investors.
These policy changes have been made due to the reliance on bonds to raise cash in recent years and the mounting payback pressure for many companies. According to the Vietnam Bond Market Association, businesses issued VND462 trillion worth of bonds in 2020, and VND658 trillion in 2021.
However, high-profile arrests in the bond market have discouraged companies from utilizing this instrument. Consequently, the value of corporate bond issuance dropped 61% to VND255 trillion in 2021, and only one issuance was successfully carried out with a value of VND110 billion in January 2022. As many bonds are set to mature in the second and third quarters of this year, companies, particularly property developers, have been negotiating with bond holders to extend payment or exchange the bonds for other assets.
Holders are selling bonds for cash at a discount of 14-17%. Brokerage VNDirect estimates that the payment amount is set to reach VND273 trillion this year.
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Source: Vietnam Insider