Novaland restructuring: Construction sites come back to life
By Hua Phuong
August 14, 2024 | 08:40 AM GMT+7
Novaland Group is in the final stages of a comprehensive restructuring effort, addressing legal, bond, and cash flow crises as it seeks to regain its position as a major player in Vietnam’s real estate market.
Once the second-largest real estate company in Vietnam, with nearly 10,600 hectares of land and a net asset value of about $14 billion at the end of 2021, Novaland was hit hard by the Covid-19 pandemic, legal challenges and financial crises.
These factors brought many of its construction sites to a
standstill by mid-2023, according to Novaland chief financial officer Duong Van Bac.
In response, Novaland initiated a comprehensive
restructuring of its workforce, finances, and legal affairs, with the goal of
restoring its former strength.
Positive financial signs
Despite facing numerous challenges, Novaland's restructuring
efforts are beginning to yield positive results. In the first half of 2024, the
company reported VND 7,056 billion ($281 million) in net revenue and VND 345 billion ($13.7 million) in profit
after tax, marking a 56 per
cent increase in revenue and a return to profitability from a VND 410
billion ($16.3 million) loss
in the same period last year.
This revenue growth was driven by service and financial
activities, along with contributions from projects such as NovaWorld Phan
Thiet, Palm City, Aqua City, and NovaWorld Ho Tram.
As of June 30, Novaland’s total debt was VND 54,635 billion ($2.17 billion), down 12.9 per cent from the end of
2022. This includes VND 24,578 billion ($978 million) in domestic debt, VND 21,209 billion ($844 million) in foreign
debt, and VND 6,647 billion ($264
million) in private bond debt.
All categories of debt have decreased compared to the end of
2022, except for a slight increase in domestic debt compared to the end of
2023.
Novaland has repaid VND 5,700 billion ($227 million) in old domestic debt and
secured VND 3,700 billion ($147
million) in new disbursements. Foreign debt was reduced by VND 2,545
billion ($101 million) ,
mainly through restructuring by extending payment terms and asset swaps. So
far, the company has extended VND 15,390 billion ($613 million) in foreign debt and is
continuing negotiations to restructure the remaining VND 5,819 billion ($231 million).
For private bonds, VND 3,585 billion ($143 million) has been addressed, with
VND 1,454 billion ($58
million) in extensions, and negotiations are ongoing for VND 7,393
billion ($294 million).
Bond debts are being managed through term extensions, product swaps, and
collateral processing.
Construction resumes at major projects
Key projects have resumed construction as legal issues are
gradually being resolved. As of August 2024, construction activity has
restarted at 14 of Novaland's 16 projects in Ho Chi Minh City and nearby
provinces.
For example, the Aqua City project in Dong Nai province, consisting of nine
sub-projects, is progressing with detailed planning expected in August and
October 2024. Some sections have already received sales permits, and
construction has resumed.
NovaWorld Ho Tram in Ba Ria – Vung Tau province, which consists of seven clusters, has
completed legal formalities for four clusters, with the remaining three
expected to be finalized this year. Legal issues, including land-use payments,
are expected to be resolved by late 2024.
Similarly, the NovaWorld Phan Thiet project in Binh Thuan province has
accelerated construction since January 2024, with ongoing handovers in
completed sections. Land-use payments are expected by September 2024, with
construction permits by October 2024.
Construction has resumed on some parts of NovaWorl Phan Thiet. Photo by Hoang Anh
In Ho Chi Minh City, Novaland is actively working on four
projects, including
Grand Manhattan, Palm City, Victoria Village, and Sunrise Riverside, with plans
to hand over a significant number of units in 2025 and 2026.
Novaland has also proposed solutions to resolve legal
obstacles in other projects, including Thanh My Loi, The Water Bay, and Ly Chinh Thang.
Customer support
essential
While legal challenges are being addressed, Novaland is also
accelerating home deliveries in eligible projects. By the end of June 2024, the
company had handed over thousands of units across various projects.
CFO Bac
emphasized the importance of customer support during this challenging period,
urging patience as Novaland continues its efforts to complete the restructuring
process. The company remains committed to ensuring construction progresses and
homes are delivered, despite ongoing financial constraints.
"We’ve been tirelessly working to reach the shore, but
there’s still some distance to go. The final stretch of any race is always the
toughest, with the pressure mounting as you near the end," said Bac.
Luong Thi Thu
Huong, Novaland’s director
of legal affairs, added that while the
company is doing its utmost to continue construction and handovers, immediate
solutions for customer support are challenging due to cash flow issues.
She acknowledged that customer complaints and gatherings
have delayed legal approvals, and urged customers to stand by the company
during these difficult times to help Novaland complete its restructuring phase.
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