Novaland strikes deal to convert bonds to shares, easing debt pressures

By Dung Pham - Apr 04, 2024 | 09:00 AM GMT+7

TheLEADERThe move involves the conversion of bonds into shares, signaling a strategic maneuver to shore up the company's financial standing and navigate turbulent market conditions.

Novaland, a leading player in Vietnam's real estate sector, has struck a pivotal deal aimed at easing its financial burdens amidst a challenging economic backdrop compounded by legal complexities hitting its real estate development.

In a bid to restructure its financial obligations, Novaland sought consensus from bondholders regarding the conversion of a $300 million bond issue.

Remarkably, all 25 bondholders, representing a substantial outstanding balance of $284 million, have unanimously endorsed Novaland's proposed conversion scheme, as per the predetermined settlement agreement.

This financial maneuver, initiated since 2021 without collateral, bears an annual interest rate of 5.25 per cent.

Under the revised terms, accrued interests up to December 31, 2024, will be deferred for payment, with the payment date aligned with the bond maturity in 2026 or potentially a pre-maturity buyback.

Moreover, bondholders have been presented with the option to convert their bonds into shares of Novaland at an initial conversion price of VND40,000 per share.

Although this represents a reduction from the 2021 offer of VND135,700 per share, it still commands a significant premium, more than double the current market price of Novaland shares.

Should bondholders opt for conversion, they will be subjected to a phased execution at diminishing prices, providing them flexibility in their decision-making process.

Novaland strikes deal to convert bonds to shares, easing debt pressures
Novaland is grappling with debt woes. Photo by Hoang Anh

Novaland has meticulously outlined a structured timeline for this conversion process, designed to optimize shareholder value while bolstering the company's financial resilience.

In the broader financial landscape, Novaland has disclosed its audited consolidated financial statements, reflecting a marginal decline in net profit compared to standalone figures. This variance can be attributed to fluctuations in profits from associated ventures and gross profits.

Furthermore, the audited financial statements shed light on Novaland's debt dynamics, showcasing a positive trajectory despite prevailing challenges. 

Notably, the total debt of the enterprise stood at approximately VND57.7 trillion ($2.8 billion) as of December 31, 2023, marking a discernible decrease from the preceding year.

Over the past fiscal year, Novaland has demonstrated proactive debt management, repaying a substantial portion of its bond debt and successfully extending repayment terms on the remaining balance.

The company remains engaged in negotiations with bondholders, underscoring its commitment to sound financial stewardship amidst evolving market conditions.

In reaffirming its strategic direction, Novaland's leadership emphasizes a multifaceted approach to fortify its business operations. 

This entails the deployment of pivotal projects, strategic debt restructuring initiatives, and innovative mechanisms to optimize asset utilization and enhance shareholder value.