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.
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.
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.
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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