Sacomreal boosts issue of project bonds

Thursday, May 15, 2008
To have enough investment capital for real estate, many enterprises selected to issue project bonds quickly. In conjunction with Hai Thanh Ltd Co in building Phu Loi 1 apartment area, HCM City's Dist 8, Sacomreal issued 100 billion dong in six-month bonds in the end of January 2008, the real estate trader's chair said that the issue time was calculated carefully so when the bonds come to mature in July, it will be the right time for completing the foundation of Phu Loi 1 apartment.
Sacomreal also ruled that each person who holds one bond with a face value of 500 million dong will be given priority to buy an apartment after the project is finished. Bond buyers will be subject to 5% discount of apartment value and receive a coupon rate of 8.8% per annum.
In March 2008, Sacomreal also issued 750 billion dong in shares with the par value of 1.5 billion dong each in cooperation with an investor to start the construction on Phu My apartment area, HCM City's Dist 7. the project bondholder is also allowed to buy an apartment plus the 8% discount preference. Dang Hong Anh, the company's general director said that capital raised from bond issues will be invested in large sized projects with over 1,000 apartments each. The coupon rate of these project bonds is 12% per annum.
Similar to Phu Loi 1 project's bonds, Phu My project bonds will mature in November 2008 when the foundation of project could be finished. By that time, bondholders will have the right to sign contracts to buy apartments. By the middle of May, Sacomreal will continue issuing bonds to raise investment capital for Phu Loi 2 property project.
In addition, Phat Dat Real Estate Development Joint Stock Co also plans to issue bonds for projects in Dist 7 such as raising 7.5 trillion dong for The EverRich II, nine trillion dong for The EverRich III. Similarly, Thanh Cong Textile Co recently announced that it would issue convertible bonds to build Thanh Cong Tower 1, 2 and 4.
Regarding some project bond issuers, according to Le Hoang Chau, chair of HCM City Real Estate Association, in the disadvantaged situation in terms of capital and banks are tightening up property lending, capital mobilisation by bond issue is an effectively new method. However, bonds naturally are the method of mortgage borrowing, in which bond buyers believe in that issuer's prestige and trade name. Therefore, there should be particular regulations to protect bondholders' interests.