Expert: Negotiating with bondholders requires goodwill from both sides

According to the General Statistics Office, 235 real estate businesses were dissolved nationwide in the first two months of this year alone, up 19.9% ​​over the same period last year. Not only that, real estate companies also face a bond maturity of up to VND119,000 billion in 2023.

Decree No. 08/2023 has some notable points such as allowing the bond term to be extended to no more than 2 years; allowing enterprises to pay the principal and interest of bonds at maturity with other assets; temporarily postponing regulations on professional securities investors, bond distribution time...

Experts say this will be the last chance for bond-issuing businesses to overcome difficulties and regain customer trust. Therefore, real estate companies need to take advantage of this policy to make the right decisions in the next 9 months.

Both sides accept the disadvantage

According to Mr. Nguyen Duc Lap - Director of the Institute of Real Estate Research and Training, Decree 08 was issued in the context of enterprises issuing bonds in the real estate sector facing many difficulties. Many enterprises had to delay debt repayment when the bonds matured.

Therefore, Mr. Lap believes that the new decree will create a legal basis and help businesses have more time to restructure, restructure debt, and convert it into other suitable assets.

Investors and businesses will have more time to negotiate to extend the bond repayment period. Photo:Quynh Danh.

“The Decree has created conditions for both investors and bond issuers to negotiate and resolve difficulties and problems caused by the market. This is the last chance for businesses to overcome difficulties and regain the trust of customers,” Mr. Lap shared.

Mr. Nguyen Van Dinh - Vice President of Vietnam Real Estate Association, said that before Decree 08, enterprises that did not pay when bonds matured would have to appear in court, be suspended, not be able to access other sources of capital, stop operating and go bankrupt. This would make it increasingly difficult for enterprises, investors, banks and the economy.

Both sides will have to accept losses. However, this is still an opportunity for both investors and businesses to overcome the current difficult period.

Mr. Nguyen Van Dinh - Vice President of Vietnam Real Estate Association

According to Mr. Dinh, many external conditions have affected the real estate industry such as economic recession, tight credit policies, complicated legal mechanisms, etc.

Therefore, Decree 08 was issued to extend the time and create conditions for businesses to negotiate with investors. Both sides will have to accept disadvantages.

"However, this is still an opportunity for both investors and businesses to overcome the current difficult period," Mr. Nguyen Van Dinh shared.

According to the Ho Chi Minh City Real Estate Association (HoREA), the total value of real estate corporate bonds maturing in 2023 and 2024 is very large, up to VND230,000 billion. Of which, in 2023 alone, it is about VND119,000 billion.

Temporary solution

According to Dr. Can Van Luc - member of the National Financial and Monetary Policy Advisory Council, the new decree will create a legal basis, ensuring consistency and safety in implementing negotiations to exchange "bonds for goods".

However, Mr. Luc said the issue of negotiation deadline and related factors are still left open in the decree.

“The government does not provide detailed instructions on the negotiation issue. This will depend on the goodwill of both sides,” Mr. Can Van Luc shared.

The negotiation will depend largely on the goodwill of both sides. Photo:Quynh Danh.

Besides, Mr. Nguyen Duc Lap commented that the decree is only a temporary solution to help real estate businesses overcome the difficult period. Solving the bond issue cannot help the real estate market to be completely unblocked.

“Businesses need fast, strong credit capital from banks to carry out construction of unfinished projects. In addition, legal bottlenecks also need to be removed so that businesses can clear supply sources and bring products to market,” Mr. Lap shared.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that negotiations will take a long time for businesses to reach an agreement with bondholders, and in some cases, the agreement may even fail.

“If negotiations are conducted with goodwill, sincerity and a spirit of cooperation, this will be an optimal method. This is similar to the image of people on a boat rowing together to overcome the storm,” commented Mr. Le Hoang Chau.

In addition, the head of HoREA also pointed out that Decree 08 will “cease to be effective” until December 31, 2023 for some regulations. Therefore, in the next 9 months, real estate businesses need to make efforts to restructure products towards developing the real estate segment with high liquidity.

“Businesses need to implement promotions, increase discounts, and reduce house prices with the principle of accepting to sell at a loss to ‘cut’ losses,” Mr. Le Hoang Chau affirmed. He also emphasized that real estate businesses need to “survive” before finding opportunities for future development.

In 2023, the world economy is forecast to continue to fluctuate and not recover quickly. Many major economies still face risks such as slow GDP growth, inflation, unemployment, bad debt, etc.