The Ministry of Finance proposed a number of solutions to clear the bottlenecks of the corporate bond market, including a proposal to restructure bond debt with real estate products.

Ensure legal regulations

According to the Ministry of Finance, the current difficulty of the corporate bond market is the decrease in the volume of new bond issuance; bond investment demand, especially from individual investors, which has decreased since the cases of handling Tan Hoang Minh and Van Thinh Phat; premature repurchase volume increased and there was a phenomenon of investors reselling bonds; a large number of bonds is coming due soon, enterprises may face difficulties in cash flow to balance resources to pay due debt obligations.

Along with that, businesses still have a need to mobilize capital for production and business activities in the period of economic recovery after the Covid-19 pandemic.

In order to solve the obstacles of the corporate bond market, one content that attracts attention in the draft Decree is that enterprises are allowed to pay bond principals and interests with other assets. According to the Ministry of Finance, according to the current provisions of the Civil Code 2015 (Article 286) and relevant laws, enterprises can convert bonds into loans or repay bonds with other property.

Recently, a number of enterprises, especially in the real estate group, have had difficulty paying their debt obligations due in 2023. Some enterprises have negotiated to pay the bond principal by shares, and some enterprises have negotiated with investors to pay the principal and interest of bonds by real estate products.

On the basis of summarizing opinions of ministries, branches, experts and appraisal opinions of the Ministry of Justice, the issuing enterprise has a basis to repay bonds with other assets of the issuing enterprise or the third party in the context that enterprises are facing difficulties in balancing cash flow to pay due bond debts, the Ministry of Finance shall submit to the Government for regulations on cases where enterprises cannot pay bond principals and interests in cash, investors can negotiate with investors to repay with other assets on the following principles: complying with the provisions of civil law, specialized law and relevant laws; must be approved by the bondholder; the enterprise must disclose information and take responsibility for the legal status of the assets used to pay the principal and interest of the bond.

Negotiate to extend the bond's maturity

Along with the above proposal, the Ministry of Finance also recommended stipulating that previously issued bonds are negotiated to extend the bond's maturity. In the context of financial and monetary markets having difficulty in liquidity, enterprises find it difficult to raise capital from issuing stocks and bonds, while the pressure to repay bonds due to maturity in 2023-2024 is high.

Therefore, in order to support enterprises to mobilize capital for production and business activities and to restructure debts, the Ministry of Finance shall submit to the Government for regulations allowing previously issued bonds with outstanding debts to be negotiated to change the bond's maturity, the maximum period is two years. Additionally, supplementing the provisions that in case of negotiation to change the terms and conditions of the bond (including the bond term) but the investor does not approve, the enterprise must pay the principal and interest of bonds fully to these investors.

Pursuant to the Ministry of Finance, the provisions of the draft Decree are in line with the policy of the Politburo on key tasks and solutions, including drastic implementation of solutions to stabilize and remove difficulties for the corporate bond market through flexible measures in line with legal regulations, such as restructuring terms, interest rates, diversifying payment instruments, prepayment.

In the draft, the Ministry of Finance also proposed to stop implementing until the end of December 31, 2023 for regulations on determining the status of professional securities investors as individuals; from January 1, 2024, these regulations will continue to be implemented.

Many people think that, in the context of the current difficulties in the corporate bond market, allowing bondholders to swap bonds for real estate is a reasonable solution to help issuers deal with their troubles when the bond debt matures. However, the restructuring of bond debt with real estate products will not be simple in practice, because it is related to the project’s legal documents, the financial capacity of the bondholders in the circumstance of having to offset additional costs, even how the product price will be calculated, etc.

According to economist Dinh Trong Thinh, proposing a solution to repay the bond debt by other assets of the issuers or third parties, namely swapping bonds into real estate products, will create opportunities for people to buy houses at cheaper prices than the market, and at the same time prove that the bond issuer has assets to guarantee, help people feel more secure when investing.

Meanwhile, experts also note that this solution may create a bad precedent, some businesses will be able to issue bonds with the mindset that they can always sell their goods, even if there are real difficulties or not, just by lowering real estate prices to liquidate bonds.

Emphasizing that the Ministry of Finance has drafted a Decree amending and supplementing a number of articles of the Decrees on corporate bonds with many positive contents, Mr. Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association suggested the Government urgently issues this Decree.

Commenting specifically on the draft Decree, Mr. Le Hoang Chau said that the proposal to determine the status of a professional securities investor as an individual; the credit rating results for bond issuers applied from January 1, 2024, is not really consistent with the actual situation, because there are only more than 10 months left to this point of time.

Consequently, it is proposed that the Government consider allowing it to be applied from July 1, 2024, or from January 1, 2025.