Vietnam’s second-biggest property developer No Va Land faces cash crunch: sources

Construction News Vietnam
A woman rides a bicycle past the building of the State Bank of Vietnam in Hanoi. (Reuters photo)

Vietnam’s second-biggest property developer No Va Land faces cash crunch: sources

No Va Land fires staff, seeks urgent asset sales

Vietnam’s second-biggest listed developer, No Va Land, is firing staff and seeking urgent asset sales, company and industry sources said, as it struggles to pay creditors in the latest sign of distress in the country’s real estate sector.

The company’s signals of distress come amid wider turmoil in Vietnam’s property and credit market, which has been exacerbated by arrests of bosses of real estate companies suspected of wrongdoing and a rapid fall in the value of the country’s currency, the dong, after the central bank relaxed its peg against the dollar.

Two sources with direct knowledge of the matter told Reuters the company was trying to sell distressed assets, including hotels and resorts, to raise cash to pay back loans and fund its operations. The sources declined to be named because of the sensitivity of the matter.

No Va Land did not respond to an emailed request for comment.

The company’s stock price was down by nearly 7% by midday on Monday, making it one of the worst performers in the Vietnam index, which was down by 2.7% at 1pm.

Trading has nearly stopped, according to data from Hochiminh Stock Exchange, with only 17,600 shares of the company traded by midday, the lowest volume in a year.

No Va Land has lost nearly 40% since the beginning of this year, reaching its lowest level since April 2021.

The liquidity squeeze is the result of the authorities’ crackdown on the market for privately placed corporate bonds, which have been widely used as an alternative source of cash by real estate firms after a tightening in lending conditions since the middle of this year.

“Debts are coming due this year-end and, with the current tightening regulations on loans given to real estate firms, it’s hard for the company to have cash,” one of the sources said.

‘It hurts’

During the past month, the company has laid off about half of its workforce, and most construction has been put on halt, three sources said.

On Monday, No Va Land chairman Bui Xuan Huy told state-run newspaper Tuoi Tre that market developments were unfavourable, and that the company had been forced to cut staff.

“It hurts,” he said, adding: “We hope the State Bank of Vietnam will work out measures to help real estate developers and investors to have access to credit.”

On Sunday Vietnam’s central bank said in an interview the bank had held meetings with commercial banks and offered liquidity support to those in need, confirming a Reuters report from last week.

The central bank has asked the company to redeem some of its corporate bonds because they had been missold to investors without proper information about the risks, a third source said, aggravating its liquidity woes.

This year No Va Land has been the biggest issuer of corporate bonds among Vietnam’s property firms, according to the Vietnam Bond Market Association, an industry body, placing debt worth 9,857 billion dongs (US$396.3 million).

No Va Land’s dollar-denominated debt, which is a small portion of its total bonds, has come under pressure in recent sessions, and prices for a $300 million convertible bond due in July 2026 have dropped sharply to 81.59 cents on the dollar.

Founded in 2007, No Va Land is active mostly in residential property and luxury resorts. It is Vietnam’s second-biggest listed property firm, with a market capitalisation of $4.7 billion, after Vingroup’s real estate unit Vinhomes.

No Va Land last month posted a net profit of about 2 trillion dong, down 19% against the same period last year because of higher expenses caused by the stronger dollar, according to the company filings.

Demand in Vietnam’s real estate market is expected to stay strong through 2023, Moody’s said in a report in late August.

A fourth source, a supplier for one of No Va Land’s projects, said his 200 billion dong ($8 million) worth of raw materials were stuck as the project was being put on hold.

No Va Land is planning to meet with creditors on Monday afternoon to negotiate further loans, according to a fifth source familiar with the matter.