Vingroup JSC (VIC) has canceled its U.S. dollar-denominated bond offering due to higher-than-expected yields and will consider other options, including pursuing a strategic investor or a loan next year.
“If we wanted to go ahead before the end of the year, it would be very expensive,” Le Thi Thu Thuy, the chief executive officer of Vietnam’s biggest property developer, said in an interview today. “Most investors want to close the books right now. No one wants to look at a new issue, especially a new issuer. We’re looking at other options that would be cheaper.”
Vingroup was seeking to sell as much as $300 million of five-year notes which it could have bought back after the third year and the bonds were being marketed to yield 12 percent to 12.5 percent, Thuy said. As permission by the country’s central bank to conduct a bond sale expires Dec. 31, Vingroup was being forced to rush and pursue a deal at too high a cost, she said.
The sale of notes by Vingroup would have been Vietnam’s second offering of dollar bonds this year, according to data compiled by Bloomberg. Companies are seeking to raise debt as the Southeast Asian nation’s property market cools and incomplete projects risk saddling the country’s banks with a growing portfolio of non-performing loans. Vietnam’s economic growth is expected to be 5.2 percent this year, the slowest pace of expansion since 1999.
Vingroup dropped 1.4 percent to 73,000 dong, the lowest since Dec. 7, on the Ho Chi Minh City Stock Exchange today. The benchmark VN Index (VNINDEX) fell 0.1 percent.
Vingroup is speaking to “a couple” of potential strategic investors and would consider selling as much as a 10 percent stake, equivalent to about $250 million, Thuy said. Another option could be an international or domestic loan.
Proceeds would be used to complete two high- to mid-end mixed-use projects in Hanoi and make land payments, Thuy said. Vingroup will be handing over apartments in those projects to buyers from January.
“A loan would be much more straight-forward and simpler,” Thuy said. “A strategic investor would take time. We have to find the right fit, like looking for a husband or wife. You have to find someone that will add value to you.”
The developer, based in Hanoi in the country’s north, is currently constructing eight mixed-use projects at prime locations around Vietnam at a total cost of more than $4 billion. The company has about $360 million in short-term investments, cash and cash-equivalents, Thuy said.
Vingroup will also seek to raise about $300 million via a share sale in Singapore by August to fund its projects. “That will be important for us to do,” Thuy said.
The company shelved plans to list in Singapore last year when the city-state’s benchmark Straits Times Index (FSSTI) fell 17 percent. Shares of Vingroup are down 6.5 percent this year.
A bond sale may still happen in 2013, depending on market conditions, and would require approval from the country’s central bank, Thuy said.
Vietnam Joint Stock Commercial Bank for Industry and Trade, the country’s second-largest lender by market value, raised $250 million when it sold 8 percent notes due 2017 in May in its debut issue in the U.S. currency, according to data compiled by Bloomberg.
Vingroup is rated B+ by Fitch Ratings, four steps below investment-grade, and one level lower at B by Standard & Poor’s. Credit Suisse Group AG and Citigroup Inc. were helping to manage its bond sale, a person familiar with the matter has said, asking not to be named because the details are private.
Thuy anticipates Vietnam’s property market will improve next year as the government enacts policies to bolster the industry.
Prime Minister Nguyen Tan Dung, at a meeting today, called for measures to resolve difficulties in the real-estate market. The steps include restructuring property products to meet market demand, reducing prices, providing products directly to buyers and filtering out weak real-estate companies, according to a posting on the government website. The government will discuss the measures this month.
The retail sector continues to be strong for Vingroup, Thuy said. Occupancy rates at the high-end Vincom Center A in Ho Chi Minh City are at about 95 percent and rents at the company’s five shopping centers throughout the country have increased 5 percent to 10 percent annually, she said.
“Looking at next year, we are quite bullish,” Thuy said. “With the government behind the real-estate market, it will improve significantly.”
To contact the reporter on this story: K. Oanh Ha in Hanoi at firstname.lastname@example.org