Decree 08, a magic wand for corporate bonds?

06:00 | 30/03/2023 Finance-Banking Follow Ven.vn on

(VEN) - Economists believe the newly issued government decree on the private issuance of corporate bonds will have a positive impact on the corporate bond market.

Decree 08 allows bond issuers to negotiate with bondholders to extend maturing bond debt payment by up to two years

Temporary solution

On March 5, 2023, the government issued Decree 08/2023/ND-CP amending, supplementing and suspending the effect of a number of articles in previous decrees that regulate the private placements and trading of corporate bonds in the international and domestic markets.

The new decree is expected to help the corporate bond market avoid short-term collapse by reducing the supply of bonds, extending the repayment period and increasing the demand for bonds.

Chief Economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Dr. Can Van Luc, member of the National Financial and Monetary Policy Advisory Council, believes Decree 08 is necessary and welcomed by investors and businesses.

According to Luc, the directive allows bond issuers to negotiate with bondholders to extend maturing bond debt payment by up to two years, easing the pressure of debt payment worth about VND120 and VND 110 trillion for real estate businesses in 2023 and 2024, respectively.

It also allows the exchange of bonds for property and stipulates that bond issuers must ensure legitimate and fair interests of investors, Luc says. At the same time, he feels real estate businesses should be willing to slash prices by 30-40 percent, promote product and operation restructuring to reduce costs and quickly issue bonds in compliance with Decree 08 in order to have money to pay off debts, complete projects, diversify capital sources and pay more attention to financial risk management.

Decree 08 eases pressure on bond debt payment by real estate businesses

Light at the end of tunnel

Truong Hien Phuong, Senior Director of KIS Vietnam Securities Joint Stock Company, views Decree 08 as doing away almost completely with the entanglements of Decree 65/2022/ND-CP that created practical difficulties for businesses and investors to buy bonds and paving the way for domestic enterprises to recover from recent "turbulences".

According to Decree 08, if an issuing enterprise is unable to pay in full and on time the bond’s principal and interest in Vietnamese dong according to the issuance plan announced to investors, enterprises may negotiate with the bondholder to pay the principal and interest due with other assets, if the issuing enterprise complies with the provisions of civil and relevant laws.

Phuong compared Decree 08 to a “light at the end of tunnel” that could help real estate businesses avoid bankruptcy.

Investment consultant VNDirect estimates that the maturity value of corporate bonds will reach about VND 252,000 billion this year, up 64 percent over 2022.

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