Real estate companies issue bonds massively

SGGP
Reports by securities companies showed that more than VND60 trillion worth of corporate bonds has been issued since the beginning of this year, of which, real estate and construction field was the runner-up in the amount of issued corporate bonds with VND16.23 trillion, accounting for 27 percent.

Real estate companies issue bonds to mobilize capital. (Photo: SGGP)

Real estate companies issue bonds to mobilize capital. (Photo: SGGP)

Amid the context that the Government continues to tighten credit, especially credit to risky fields, such as real estate and securities, real estate companies have massively issued bonds to mobilize capital in the market so as not to depend on bank loans. Noticeably, interest rates of bonds issued by real estate companies were extremely high, nearly two times higher than bank savings interest rates.
Phat Dat Corporation Real Estate Development has issued VND850 billion worth of corporate bonds in three times of mobilization, of which the highest interest rate was up to 14.5 percent per annum.
Novaland Investment Joint Stock Company issued VND400 billion worth of bonds in two times of issuance with interest rate of nearly 11 percent per annum. Dat Xanh Group recently issued VND200 billion worth of bonds with an interest rate of 11 percent per annum.
Earlier, Ha Do Group, Van Phu Investment Joint Stock Company and Cuong Thuan IDICO Development Investment Corporation also issued bonds to attract capital in the market with interest rates of 10-12 percent per annum.
According to MBS Securities Company, there were more than VND61.03 trillion worth of corporate bonds having been issued in the first five months of this year. Of which, real estate and construction companies have issued VND16.2 trillion worth of bonds and this is the field with highest interest rate level, generally above 10 percent per annum. Some companies offered interest rate of up to 15 percent per annum. The bond terms were from one year to ten years, of which the majority was two-year term. 
Meanwhile, banks issued VND17.6 trillion worth of bonds with popular interest rates from 6.4 percent per annum to 7.5 percent per annum and regular terms from 3 years upwards to 5 years top.
Securities enterprises mobilized VND15.74 trillion via bonds with interest rates from 8 percent per annum to 11.3 percent per annum and regular terms from one to three years. Thus, with the highest interest rate level at 14.5 percent per annum in the corporate bond market, investors will receive profits nearly two times higher than those from long-term savings at banks and nearly three times higher than those from short-term savings whose interest rates are at 5-6 percent per annum. This is one of the reasons that cause mobilizing interest rates of banks to pin at high level for a long time. 
According to the leader of a securities company which is selling a great number of corporate bonds, the reason real estate field offered the highest interest rate and attracted several investors, especially investment funds and banks, was that this kind of bonds usually has collateral in the form of land use rights or guaranteed shares are of firms with good business results.
However, he also said that, besides large and prestigious enterprises, many firms issued bonds without collaterals or their collaterals were projects and properties that would be formed in the future or shares which depend on the stock market so there is high volatility.
When issuing bonds, some firms even were guaranteed by their ownership at some nameless companies that had not gone public so the information about this company was not transparent.
The corporate bond market is heating up with securities companies, which are also consultants for corporate bond issuance, massively running advertisements calling for investment in corporate bonds via emails, messaging apps and telephones. Many individual investors have been attracted due to high interest rate. Therefore, individual investors should not buy corporate bonds without collaterals because of high interest rates as the risk is extremely high.
In that case, securities companies only play the role of a brokerage while rights, liabilities, profits and risks all belong to investors. Even if banks are buyers, they also require collaterals to be evaluated in details and often much higher than the value of issued bonds.
Mr. Nguyen Hoang Minh, deputy director of the State Bank of Vietnam Ho Chi Minh City Branch, also emphasized that investors, especially individual investors, can choose corporate bonds as an investment channel but high interest rate comes with high risk, especially investment channels with interest rate above 10 percent per annum, the risk will be greater. As a result, they should choose prestigious firms and transparently listed ones on the stock market.
In order to avert risks, when buying corporate bonds, investors should find out whether those corporate bonds are guaranteed by banks or not and whether their collaterals are legal properties or not. In case there is bank guarantee, transparent bond issuance information and collaterals being notarized then buyers can feel secure.

By Nhung Nguyen – Translated by Thuy Doan

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