Bondholder: Vietnam's No Va Land at risk of acceleration notice if it fails to negotiate restructuring in good faith
To avoid issuance of an acceleration notice, No Va Land Investment Group Corp. must engage with an Ad Hoc Group of international bondholders, comprising investors with a combined AUM in excess of USD15bn, holding over 75% of USD 300m convertible bonds, to negotiate a restructuring agreement in good faith. An acceleration notice would have a spiralling effect on other stakeholders; if unsecured creditors accelerate the debt to step to the front of the line, more senior (secured) creditors will likely accelerate, derailing the entire restructuring process underway with onshore creditors, risking bankruptcy. Furthermore, equity could be zeroed out, ceding control of the company to creditors.
The Trustee to No Va Land's USD 300m convertible bonds, Bank of NY Mellon, has already issued multiple Event of Default notices, most recently on 17 July 2023, related to the missed coupon payment due 16 July 2023. Despite a process to negotiate a consensual restructuring in the wake of a forbearance agreement having been attempted, the Board of No Va Land has refused to engage with the group in good faith.
The case has implications for other Vietnamese conglomerates with debt trading at stressed levels and refinancing concerns. This is the first restructuring in the context of the Vietnam 2035 vision and government attempts to capitalise on the growing China + 1 strategy. The stalling of No Va Land's restructuring almost certainly creates issues for other companies which are critical to the Vietnamese economy. This would seem entirely unsatisfactory for the government's plans to achieve its ambitious GDP growth in 2H 2023, which will be reliant on foreign investment after GDP growth significantly slowed, to 3.7% in 1H 2023, from 8% in 2022.
The Ad Hoc Group, whose members have been significant investors in Vietnam over many years, are highly concerned bout the prioritisation of onshore creditors over international investors. A failure to reach an agreement is significantly impacting Vietnam's standing in the international financial market and damaging investor confidence in the country.
A bondholder said: "As long term and significant investors in Vietnam, we urge the Board of No Va Land to engage with us to reach a consensual agreement, rather than refusing to countenance serious negotiations. This is for the good of the company, its stakeholders and Vietnam's standing among international investors. No Va Land's proposal further erodes our confidence in the process, forcing us to consider an acceleration notice which would negatively impact creditors and likely wipe out equity. By negotiating with onshore investors while blatantly sidelining international investors, No Va Land is projecting the message that global investors will not be supported but overlooked in a default, which is not conducive to encouraging the FDI Vietnam needs to capitalise on the growing China + 1 investment strategy."
European business confidence in Vietnam dropped 4.5 points in Q2 2023, its lowest level in over a decade (excluding the Covid pandemic) and worse than during the Vietnam banking crisis of 2012, according to a report by the European Chamber of Commerce in Vietnam. The number of businesses who plan no increase in FDI in Vietnam rose c.4% QoQ to 40%. The top two obstacles cited to doing business are unclear rules and regulations and administrative issues and difficulties.
Continued Foreign Direct Investments into Vietnam are required to support the rapid capital expenditure to scale domestic infrastructure spending and this all needs to be underpinned by a functioning restructuring regime.
Notes to Editors:
About the Ad Hoc Group
The Ad Hoc Group is a group of funds managed by international institutional investors. The group manages a combined AUM in excess of USD 15bn. The Ad Hoc group of creditors holds over 75% of No Va Land's US$300m convertible bonds, due 2026.
About No Va Land Investment Group Corp
No Va Land is a Vietnamese developer active in residential property and luxury resorts. Founded in 2007, it is listed on the Singapore stock exchange. The company has been hit by a liquidity crisis in the Vietnamese real estate sector. In May this year, No Va Land delayed payments on a VND 1 trillion ($42.6 m) bond that matured on 18 May. Then in June, two board members, brought in as part of the restructuring process, both formerly senior leaders at state-owned Gelex Group, stepped down less than a month after their appointment, Ms. Do Thi Phuong Lan and Mr. Nguyen Tran Dang Phuoc. Then on 16 July the company did not make the interest payment on notes due, to allow the company to maintain sufficient cash for ongoing operations.