Novaland battles debt woes despite restructuring drive

The recent disclosure of Novaland's audited consolidated financial statements reveals a notable downturn in post-tax profits last year, dipping nearly VND200 billion ($8 million) compared to independently reported figures, settling at approximately VND486 billion ($19.4 million).

This decline primarily stems from profit fluctuations within affiliated entities and gross profit margins.

Notably, auditing firm PwC has bolstered provisions for inventory devaluation at associated firms, adopting a cautious stance. These provisions are poised for reversal as project execution progresses.

Despite maintaining a significant debt burden of VND57 trillion ($2.28 billion), Novaland's audited financial report paints a relatively positive picture, indicating a reduction of around VND10 trillion ($400 million) in total debt by December 31, 2023, compared to the preceding year.

Of this debt, nearly VND31 trillion ($1.24 billion) represents short-term obligations set to mature within the current fiscal year, with over VND26.77 trillion ($1.07 billion) designated as long-term debt.

A substantial portion of Novaland's financial borrowings pertains to bond obligations exceeding VND38.26 trillion ($1.53 billion), constituting two-thirds of the total financial liabilities and issued or advised by prestigious institutions.

Despite successful debt repayments and extensions amounting to trillions of dong, negotiations persist with remaining bondholders. Post-December 31, 2023, Novaland has successfully diminished its debt exposure with select domestic and international creditors.

While domestic banking institutions such as MB, Vietinbank, VPBank, and TPBank feature prominently among Novaland's creditors, the company has also secured substantial borrowings from international entities like Credit Suisse, Seatown, Stark 1st, and Credit Opportunities, totaling over VND10 trillion, much of which matures within the current fiscal year.

Notwithstanding the progress made in debt restructuring, auditors caution that Novaland's sustained operations hinge on its ability to manage debt repayments, impending bond maturities, and the execution of strategic measures to bolster cash flow for operational requirements.

In response, Novaland's leadership continues to implement a multifaceted approach aimed at financing operational activities, including project development, debt restructuring, and shareholder support initiatives.

Additionally, asset divestment plans worth an estimated VND2.87 trillion ($115 million) are underway to meet impending debt obligations, with further asset sales anticipated to raise an additional VND8.9 trillion ($356 million) over the next 12 months.

Moreover, Novaland endeavors to bolster its financial standing through a proposed share issuance to existing shareholders and select institutional investors, with a targeted capital raise of approximately VND29.25 trillion ($1.17 billion) earmarked for subsidiary investments and debt management.

As Novaland navigates these financial challenges, its focus remains steadfast on advancing key projects, including the Aqua City, Novaworld Phan Thiet, Novaworld Ho Tram, and developments in downtown Ho Chi Minh City, signaling its resilience amid turbulent economic conditions.