Construction firms buried under mountain of debt

Vinaconex, a builder of apartment buildings and bridges, had debts of over VND20 trillion ($820.28 million) as of September, double its equity.

It needs to pay interest of around VND2.4 billion a day during the year through September.

Construction Corporation No. 1, which builds power plants and factories, had VND10.7 trillion worth of debts as of September-end, nearly three times its equity.

Tasco, a major player in build-operate-transfer projects, saw its debts soar by 79% this year to VND13.4 trillion while Deo Ca Group has reported debts worth VND27.8 trillion.

A Deo Ca company executive told shareholders earlier this month that high debts are common in the construction industry and most companies are reconciled to this.

Nevertheless, many of them are doing what they can to bring down their debt levels.

Construction Corporation No. 1 said in August it would redeem VND2.65 trillion worth of bonds prematurely this year.

During the same month Deo Ca Group issued shares to existing shareholders to raise VND823 billion to deal with debts.

Ho Chi Minh City Infrastructure Investment is planning to issue VND7 trillion worth of convertible bonds for a debt-to-equity swap to reduce its debts.

The industry’s debts are expected to reduce commensurately with the government’s public spending.

By the end of October the government had made over VND430.60 trillion worth of public investment, or 52% of the amount earmarked for the year.

Stock brokerage VNDirect expects the government to achieve 95% this year.