Novaland focuses on loans to raise new capital

According to various financial analysts, real estate developer Novaland Group is using loans rather than bonds as the primary method to mobilize capital for its developments. In an era where many property developers in Vietnam have issued bonds to finance their projects, Novaland has announced loans with various financial institutions that are worth hundreds of millions of dollars.

Since 2017 / 2018, the issuance of bonds has become a popular source of funds for property developers. The bonds pay high interest rates of 10 ~ 14%, a higher than the rate offered by companies in banking or other sectors.

A unfortunate consequence of the bond path is that developers are becoming dependent upon issuing bonds for their capital needs and are being forced to pay higher interest rates.

Underlying the importance of bonds as a capital source, the Hanoi Stock Exchange reported in November that 35 companies had raised $1.15 billion USD through 94 bond issuances. Property developers raised $235 million USD, approximately 20% of the total. 

Novaland on the other hand has chosen loans to acquire capital and has focused on borrowing money from foreign firms rather than Vietnamese domestic institutions. A recent Novaland financial report showed total loans of $1.12 billion USD. Of this amount, only $260 million USD had been raised through bonds. 

In December, Novaland reported it had obtained a loan of $250 million USD from international institutions.The company said that it had planned to borrow $150 million USD, but increased the amount to $250 million USD after many lenders expressed willingness to participate.

Since 2016 Novaland has been able to successfully borrow money from foreign financial institutions. Novaland has been successful because it has strong potential and financial capabilities and has been able to meet all transparency and other standards that have been set by its international financial partners. 

As well as developing mid-priced and high-end projects in Ho Chi Minh City, the company has been investing in the hospitality sector and developing projects through several brands and its assets are said to be valued at $3.2 billion USD. Novaland Group has said that it also plans to assist its subsidiary, Nova Hospitality, to borrow at least $250 million USD from international institutions this year, so the company plans to continue the path of loans, rather than bonds, for new projects.