Vietnam's Q1 corporate bond issuance estimated at US$1.05 billion

Vietnam's total amount of corporate bonds issued in the first quarter of 2023 was VND24.7 trillion (US$1.05 billion), according to the Ministry of Finance (MoF).

An investor holds corporate bonds. Photo: Viet Dung/The Hanoi Times

The MoF added that 96% of the amount worth VND23.8 trillion ($1.01 billion) was issued after the release of Government Decree No.08, which sets the new corporate bond rule.

The Government allows bond issuers to extend the maturity of their bonds by up to two years, which was previously prohibited, as an important change in the newly issued decree.

However, if bondholders disagree with this extension, issuers must negotiate with them. This is seen as a measure to protect investors' returns. If negotiations do not result in a favorable outcome, issuers are obligated to meet their obligations to bondholders in accordance with the originally announced issuance plan.

In the first quarter of 2023, 69 companies failed to make timely principal and yield payments on their corporate bonds, totaling about VND19.2 trillion ($819 million). Of these, 23 issuers, accounting for 50 percent of late payments, plan to negotiate with investors and report to the Hanoi Stock Exchange, the agency responsible for managing the bond and derivatives markets.

Regarding Government bonds, the MoF announced that the total amount of funds raised in the first quarter was VND105 trillion ($4.47 billion), which is 26.2% of the annual plan of VND400 trillion ($17 billion) and 97.1% of the quarterly plan (VND108 trillion or $4.6 billion).

Due to market conditions, yields on government bonds began to decline from March 10, 2023, and the demand to buy government bonds increased again, the ministry said.

This can be seen from the fact that the average bid/offer volume ratio in March was 3.39 times, higher than the ratio of 2.99 times in February, it added.

The Vietnam Bond Market Association (VBMA) reports a significant increase in the corporate bond market in 2020-2021, with issuances reaching nearly VND462 trillion ($19.53 billion) in 2020 and VND658 trillion ($27.8 billion) the following year. This growth was driven by high capital demand from real estate companies and banks on the supply side and investors' desire to earn higher interest rates than those offered by savings accounts on the demand side.

However, last year, the bond market abruptly stopped due to the arrest of major real estate developers for improper issuance and use of capital. Consequently, bond issuances in 2022 were limited to VND255 billion ($10.7 billion).

Moreover, companies are currently facing liquidity issues, increasing pressure on bond maturities, and they cannot restructure their debt by issuing new bonds. According to VNDirect Securities Company, the maturity value of corporate bonds this year will be almost VND273 trillion ($11.54 billion), with most bonds maturing in the second and third quarters. Consequently, many companies, particularly in the real estate sector, have reported defaulting on principal and interest payments. As a result, some individual investors are willing to sell their bonds at a discount of 14-17% to obtain cash.