Many Vietnam businesses struggle with restructuring

The Story of Novaland

In reality, Novaland (HoSE: NVL) has been actively restructuring since 2023, implementing various financial restructuring measures such as renegotiating debts, deferring payments, raising new capital, converting debt into equity, seeking partners, and selling non-core assets.

These measures have helped NVL gain additional capital and time to continue its corporate restructuring.

Notably, independent auditors highlighted several operational successes in NVL's financial report. For example, NVL has successfully negotiated with lenders and bondholders to restructure principle and interest loans totaling 17.336 trillion VND. Furthermore, NVL has a total of 25.439 trillion VND, including a successfully sold asset worth 1 trillion VND, and the business has made preliminary agreements to sell seven assets totaling 12.363 trillion VND. Furthermore, the business has signed memorandum of understanding to sell three assets for 9.1 trillion VND and received non-binding proposals from bidders for three other assets worth 1.982 trillion VND.

NVL has also emphasized alternative options for increasing capital and financial assistance, including meeting debt commitments in order to continue operations for at least the next 12 months.

In essence, NVL's debt obligations and need for working cash compelled the business to hasten asset liquidation. If they fail to overcome financial pressures after selling non-core assets, larger, high-value projects will almost certainly be liquidated.

Few Options for Restructuring

NVL is not an isolated situation when it comes to financial and business restructuring. Many other significant corporations are under similar financial challenges, since cash flow from sales has not increased while debts and interest payments are still due, and bond deadlines are coming. Companies also require cash to cover operational expenses and engage in projects that create income and pay off obligations.

Prior to NVL, Trung Nam Group was known for its financial troubles, which resulted in the selling of controlling interests in a project and the divestiture of its most profitable solar power project owing to bond debt. Bitexco recently liquidated a hotel, using secured assets to satisfy bond debts—another notable case.

The fact that major corporations are obliged to sell fundamental assets represents the "no other choice" scenario, in which enterprises have limit ed options. In restructuring plans and overall financial conditions, debt resolution and capital preservation are difficult to achieve because non-core asset sales may fall short of expectations (due to declining values and liquidity), sales revenue is low, new capital raising efforts are difficult, and legal risks persist.

Dr. Dinh The Hien, a financial expert, believes that in a challenging financial environment with a real estate market yet to fully recover, companies need flexible strategies. They must combine other approaches, such as negotiating with creditors, restructuring debts, or seeking strategic investors, to navigate the difficulties. Implementing multiple financial restructuring solutions also requires companies to carefully select which assets to liquidate to ensure they can sell without negatively affecting long-term operations.

In the long run, economists believe that real estate will remain a crucial industry for the economy. As a result, the 2025-2026 timeframe may witness fresh waves of investment from people with a forward-thinking mindset and extensive business expertise. This upbeat view may help the market mature and regain public trust. It might also provide ideal conditions for asset liquidation and company reorganization, notably in the real estate industry.

Returning to NVL, financial advisor Mr. Huynh Hoang Phuong noted that the company's financial information, including its losses, has already been reflected. However, there will be an impact on lending banks (such as MBB, despite reduced loan exposure, and other banks) and on NVL's capital restructuring process. Therefore, the company’s restructuring efforts may face difficulties if there are no supportive negotiations to maintain debt classifications with banks.