Novaland Seeks Equity Solution for Debt Redemption
Facing a significant cash crunch, Novaland is now seeking shareholder approval for a strategic plan to issue over 151.85 million new shares as a method of swapping for bonds. This substantial $229 million equity plan is designed to address a total of 13 bond issuances that have matured between 2023 and this year. With the company admitting it lacks the necessary cash to fulfill its redemption obligations, the proposal is a critical measure to manage its outstanding liabilities. The company is proposing to issue the new shares at a price of VND40,000 per share, a valuation that is a noteworthy double its current market value, aiming to make the swap more appealing to bondholders despite the inherent risks involved in such a transaction and the potential for a negative market reaction from existing shareholders who will experience dilution.
Financial Pressures and a Cautious Path to Stability
Novaland’s management has openly acknowledged that prolonged financial pressures and difficult business conditions have made it impossible to fulfill its debt obligations through traditional means. The severity of the company’s financial challenges is further underscored by its reported net loss of VND666 billion in the first half of 2025, in addition to its substantial outstanding loans which amount to a staggering VND61.8 trillion. Despite this precarious position, the company’s leadership remains optimistic about a potential recovery. They cite the successful resolution of legal issues for key projects and the continued backing of partners as reasons for their confidence. The new equity plan is therefore positioned not as a final solution, but as a necessary and foundational step toward restructuring the company and regaining financial stability in the long term, a process that is anticipated to be complex and lengthy.
Shareholder Dilution and Future Implementation
While the proposed share issuance is a crucial maneuver to alleviate Novaland’s immediate cash flow pressures, it will inevitably lead to a short-term dilution of ownership for existing shareholders. The plan represents a significant shift in the company’s capital structure, prioritizing the management of debt over avoiding dilution. If the plan secures the necessary approval from shareholders, Novaland intends to issue the new shares in 2026. The company has also specified that these new shares will be subject to a one-year lock-up period, a measure designed to provide a degree of stability in the market and prevent immediate selling pressure from the new bond-to-equity holders. This detailed timeline and lock-up period demonstrate a calculated approach to a complex financial challenge, reflecting the management’s cautious optimism and its commitment to a managed recovery.
