Novaland has chosen for itself a different way to mobilise Capital

Wednesday, Dec 18, 2019 10:00

Real estate developer Novaland Group has opted for an unusual way to mobilise capital.

In recent times, while many other property developers in the country have mobilised capital by issuing bonds, Novaland has kept announcing loans worth hundreds of millions of dollars from international financial institutions.

For over one year now bond issuance has become a popular source of funds for property companies. They pay high interest rates of around 10 per cent going up to 14 per cent. This is higher than the rate offered by companies in other sectors like infrastructure or banking.

The high interest rates clearly show how dependent many real estate companies are on issuing bonds to raise funds.

Thus, they are the second highest bond issuers after banks.

A report on corporate bond issuances released by the Ha Noi Stock Exchange said in November some 35 companies had successfully carried out 94 bond issuances times, raising over VND26.7 trillion.

Of them, over 20 per cent were property companies, who raised nearly VND5.4 trillion.

The biggest issuances were by Tan Lien Phat Tan Cang Logistics and Real-Estate Company (VND2 trillion), Thung Lung Nu Hoang Company (VND1.5 trillion) and Veracity (VND1.13 trillion).

The large number of companies in the industry issuing bonds has impacted the market, with the result that many have not managed to successfully make an issuance.

Not following the herd, Novaland has chosen for itself a different way to mobilise capital. In recent years it has focused on borrowing from foreign instead of domestic institutions.

Its financial report for the first quarter this year showed total loans of over VND26 trillion, with only 23 per cent, or VND6 trillion, being bonds.

Last month Novaland reported it had obtained a loan of $250 million from international institutions. It had initially meant to borrow $150 million, but increased it to $250 million after many lenders expressed willingness to come on board.

Credit Suisse AG of Singapore managed this deal, and at first some prestigious names like the Industrial& Commercial Bank of China, Taichung Commercial Bank, Taiwan Business Bank, and Taiwan Cooperative Bank joined the consortium.

OCBC joined as Mandated Lead Arranger; Union Bank of Taiwan joined as Lead Arranger; Cathay United Bank, King’s Town Bank, Malayan Banking Berhad and Taishin International Bank joined as Arrangers; while Entie Commercial Bank, Far Eastern International Bank and Sinopac Capital International Limited joined as Managers.

Novaland Group has promised to help its subsidiary, Nova Hospitality, borrow another $250 million from Credit Suisse.

The two deals take Novaland’s total borrowings to $500 million.

Last year was also a good one for Novaland in terms of raising debts: $520 million, comprising $70 million from Credit Suisse, $60 million from Standard Chartered, and a $240-million convertible bond issuance managed by The Bank of New York Mellon.

In 2016 and 2017 too Novaland had successfully mobilised from foreign financial institutions.

Speaking about the company’s ability to mobilise funds abroad, experts said it has prepared well for a long time.

Not all Vietnamese companies are able to do this since they have to be transparent, have huge potential and strong financial capacity and fully meet standards set by the foreign partners.

Novaland is now one of the leading property developers in the country and focused on developing mid-priced and high-end projects in HCM City.

NovaWorld Phan Thiet 1,000 hectares developed by Novaland

Recently it started to invest in the hospitality segment, developing many projects in tourism destinations under three main brands, NovaBeach, NovaHills and NovaWorld.

As of the end of September its assets were valued at $3.2 billion.

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