Construction and real estate businesses seek capital from shareholders to settle debts
They are considering share issuance as a means to raise funds for debt restructuring and debt repayment. In addition to private offerings, the majority of these businesses aim to mobilise capital from existing shareholders.
Construction and real estate businesses are seek capital from existing shareholders to settle debts, as part of their strategies.
During this year's shareholders' meeting season, numerous construction and real estate companies are planning to raise capital by issuing additional shares.
They are considering share issuance as a means to raise funds for debt restructuring and debt repayment. In addition to private offerings, the majority of these businesses aim to mobilise capital from existing shareholders.
Manufacturing enterprises are also calling upon shareholders to contribute capital for production expansion and project investment.
For instance, Construction Joint Stock Company 47 (C47) plans to offer 30 million shares to its existing shareholders at a ratio of 100:82.5, with each share priced at VNĐ10,000. The expected proceeds of VNĐ300 billion will be utilised by the company to settle debts.
In 2023, slow disbursement by investors in some C47 projects necessitated borrowing from banks to invest in machinery and equipment. As of the end of 2023, C47's liabilities amounted to VNĐ1.3 trillion, three times its equity (VNĐ437 billion), including over VNĐ706 billion in debt. The company's loan interest expenses reached nearly VNĐ67 billion, representing a 32 per cent increase compared to 2022.
Similarly, Bà Rịa-Vũng Tàu Housing Development Joint Stock Company (HDC) announced its plan to offer nearly 20 million shares to existing shareholders at VNĐ15,000 per share. The entire expected amount of VNĐ300 billion from the offering will be used by HDC to repay the principal and interest of eight credit contracts, including payments to BIDV (VNĐ75 billion), PG Bank (VNĐ91 billion), TPBank (VNĐ54 billion), and Vietcombank (VNĐ80 billion).
Vietnam Construction and Import-Export Joint Stock Corporation (Vinaconex - VCG) is also planning to offer a maximum of 119.7 million shares, equivalent to 20 per cent of outstanding shares, to existing shareholders at VNĐ10,500 per share. The anticipated proceeds of VNĐ1.2 trillion will be used by Vinaconex to settle outstanding debts, including those owed to banks, credit institutions, contractors, and suppliers in 2024 and 2025.
By the end of 2023, Vinaconex's total liabilities amounted to VNĐ20.45 trillion, accounting for 67 per cent of its total capital. Among these liabilities, the total loan balance was VNĐ11.1 trillion, including VNĐ4.96 trillion in long-term loans, primarily from banks, and a portion of bond balance due in June 2024 (VNĐ1.6 trillion).
Hải Phát Investment Joint Stock Company (HPX) aims to mobilise VNĐ3 trillion to restructure loans and settle outstanding debts. The company plans to offer 159.69 million shares to existing shareholders and 140.3 million shares to strategic investors, both priced at VNĐ10,000 per share.
As of December 31, 2023, Hải Phát Invest had total debts amounting to VNĐ2.46 trillion, equivalent to 68.7 per cent of its equity. Of this amount, short-term debt stood at VNĐ1.8 trillion, while long-term debt was VNĐ637 billion.
Additionally, Siba High-Tech Mechanical Group Joint Stock Company (SBG), a newcomer on the HOSE, announced its plan to offer 11.5 million shares to existing shareholders at a ratio of 100:46, priced at VNĐ10,000 per share. The intended capital of VNĐ115 billion will be used to settle debts owed to its supplier – BIVC International Agricultural Products Joint Stock Company.
Raising equity capital will assist businesses in fulfilling payment obligations, improving financial health, and reducing interest costs. However, investors should carefully evaluate the long-term growth potential of these businesses after debt repayment, as well as their capacity to provide cash dividends.
In the aforementioned cases, C47 and Siba Group do not plan to pay dividends in 2023. On the other hand, Hải Phát Invest and HDC intend to pay dividends in the form of shares at rates of 5 per cent and 15 per cent, respectively (with Hải Phát Invest offering shares after dividend payment). — VNS
