INTRODUCTION OF CT LAND CORPORATION
Overview of CT Land Corporation
1.1.1 General information of CT Land Corporation
Legal Vietnamese name: Công ty Cổ phần Bất động sản CT
Legal English name: CT LAND CORPORATION
Head Office: 117 Nguyen Dinh Chieu Street, Vo Thi Sau Ward, District 3, Ho Chi Minh City, Vietnam
Email: infor@ctland.com.vn
Main business activities: CT Land engages in real estate sector, including renting, leasing and managing properties
1.1.2 Brief history and development of CT Land Joint Stock Company
CT Land Corporation, a subsidiary of CT Group Joint Stock Company, specializes in the real estate sector The company is currently concentrating on four primary areas: residential, retail, logistics, and tourism.
CT Land, a prominent private enterprise in Vietnam with over 30 years of operational experience, has developed a diverse portfolio in various real estate segments Their expertise spans across luxury, high-end, mid-range, and affordable residential projects, as well as supermarkets, shopping malls, offices, and logistics facilities.
CT Land has experienced significant growth, boasting over 36 member companies and a workforce of 2,000 employees across various sectors The company has received more than 100 awards at both national and international levels, including the prestigious First-class Labor Medal from the President of Vietnam Notable accolades also include Agoda.com's 2018 Gold Circle Awards and recognition from Dot Property Vietnam for "Best Innovative Green Building" and "Best Mixed-use Architecture Design," alongside numerous awards from government and media organizations.
CT Land is poised to become the largest real estate developer in Southern Vietnam by leveraging its unique competitive advantages and extensive experience in Transportation Oriented and Integrated Townships Development Committed to international best practices, the company has recently adopted IFC Corporate Governance standards With a clear vision and dedication, CT Land's development strategy is centered around six key principles: Culture, Speed, Technology, Globalization, Differentiation, and WestPoint.
1.1.3 Structure of the Finance Department at CT Land Corporation
The Finance Department at CT Land Corp., as illustrated in Figure 1.1, plays a crucial role within the organization's financial framework, distinct from the Accounting department This report focuses specifically on the Finance Department's structure and hierarchy.
The diagram outlines the roles and interconnections of four key teams within the Financial Department: the Back Office (BO), Front Office (FO), Initial Public Offering (IPO), and International Product Development (IPD) teams The Back Office is responsible for preparing essential documents such as plans, reports, and statements, which are then supplied to the Front Office for further action This structure highlights the collaborative nature of the teams and their contributions to the department's overall functions.
The BO team, specifically the Front Office, plays a crucial role in managing communications and fostering relationships with partners regarding business cooperation and capital raising initiatives This team is also accountable for the IPO and IPD teams, ensuring effective collaboration and support in these key areas.
Figure 1 1 Organizational structure of the Finance Department at CT Land
CT land is currently developing 4 main product lines, including: CT Homes, CT Town, CT World, CT Com Each product lines are described as folows:
DIYAS is a pioneering housing product line utilizing 4.0 technology to address the significant demand for affordable housing This innovative approach aims to provide accessible housing solutions specifically tailored for young individuals, meeting the pressing needs of the market.
This product line targets projects with land areas under 3 hectares, strategically situated in prime locations within Ho Chi Minh City's districts and along major arterial routes, including Pham Van Dong Avenue, Ha Noi Highway, Ring Road 2, and the upcoming Metro Lines No 1 and 2.
CT World represents the strategic product line of CT Land, leveraging the extensive strengths of CT Group accumulated over 30 years This initiative aims to create a comprehensive ecosystem for its townships and mega townships, enhancing community living and development.
CT Com provides versatile commercial assets tailored to various business requirements, with floor areas ranging from 10 m² to 200,000 m² Their offerings include commercial, office, and logistical spaces strategically located along prominent commercial and financial corridors in major cities Additionally, CT Com develops tourism projects that reflect a philosophy of solidarity and harmony between people and nature.
1.1.5 Financial health and business outcomes of CT Land Corporation in 2018-2020
Table 1.1 presents the business outcomes of CT Land Corp for the period of 2018-
Between 2018 and 2021, the company's consolidated financial statements reveal significant fluctuations in growth rates, largely influenced by the progress of construction projects and the timely handover of completed works to customers.
Table 1 1 The business outcome of CT Land Corporation in 2018-2020
Source: Consolidated Financial Statements in 2018, 2019, 2020 of CT Land
In 2019, CT Land experienced significant growth, with total assets reaching VND 7,167.3 billion, a 33.11% increase from 2018, primarily driven by mergers and acquisitions of subsidiary companies The company's operating revenues also saw an astonishing growth rate of 2,121.9%, attributed to the launch of new projects, the activation of existing projects, and the collection of short-term receivables from sales and services.
In 2020, CT Land faced significant challenges, experiencing a revenue decline of over 57.6% compared to the previous year, resulting in a profit before tax of only VND 95.78 billion, an 85% decrease from 2019 This downturn is largely attributed to the severe impact of the COVID-19 pandemic, which negatively affected the entire beer industry and the broader economy, making the decline in financial performance understandable.
Drawing from the experiences of 2020 and implementing contingency plans, CT Land's Board of Directors has closely monitored market conditions and assessed financial impacts As a result, the year 2021 has shown signs of prosperity for CT Land, albeit modest, indicating a positive outlook for the company.
Summary of internship activities
As a Finance Intern in the Financial Department at CT Land JSC since March 14th, 2022, I have gained valuable practical knowledge over the past four months My experience in the Back Office has allowed me to learn from my manager and colleagues, particularly in the area of capital raising through the issuance of corporate bonds.
Initially, I was tasked with reviewing the legal documents for all completed and ongoing projects of the Company This was essential for me to grasp the key information, legal status, and construction progress of each project, enabling me to effectively assist my manager in preparing the loan and debt application.
I received training in financial statement analysis and gained insights into conducting feasibility studies, focusing on essential ratios that aid in developing financial and fundraising plans for various projects, including options like domestic bank loans, bond issuance, and international fund borrowing.
I assist my team by drafting and translating essential documents into English for international transactions Additionally, I organize and compile all necessary paperwork for the Front Office team, facilitating their interactions with partners regarding capital raising, including the bond issuance documentation.
In just four months of my internship, I gained valuable insights into the professional working environment and the bond issuance process, allowing me to apply my university knowledge in real-world scenarios This experience has also been instrumental in guiding my career choices as I approach graduation next year.
PROCESS OF CORPORATE BONDS PRINCIPAL AND
Overview of corporate bonds issuance at CT Land Corporation
Issuing bonds is an effective strategy for non-IPO real estate businesses to raise capital for project development, leveraging benefits such as attractive interest rates and shorter interest payment periods.
To fully grasp the payment process for corporate bonds' principal and interest, it's essential to first explore the bond issuance procedure at CT Land Corp As illustrated in Chart 2.1, the steps involved in issuing corporate bonds at CT Land Corp are outlined This article provides a concise overview of the entire procedure, accompanied by a practical example of how bonds were issued to raise capital for the Léman Cap Residence project, which is developed by Casablanca Joint Stock Company, a subsidiary of CT Land Corp and the bond issuer.
CT Land Corp.'s corporate bond issuance process is governed by the Law on Enterprises No 59/2020/QH14 and Decree No 163/2018/ND-CP, alongside the regulations and requirements set by the Ha Noi Stock Exchange.
Figure 2 1 Corporate bond issuance flowchart at CT Land Corporation
Step People in charge Flowchart
Source: Bond Issuance Procedure at CT Land Corporation, 2022
Prior to issuing bonds, the Issuer performs an asset valuation, typically focusing on land use rights and off-the-plan properties, to assess the necessity for capital raising and to identify the maximum amount that can be raised This evaluation is crucial for initiating the bond issuance process.
Issuer disclose information on bond issuance results and report results
Issuer disclose information before the issuance
Issuer prepare bonds issuance documents
Issuer make bond principal and interest payments
Issuers are required to disclose information and provide periodic reports to the HNX until the maturity date, ensuring transparency about their business operations They must also engage a securities company to assist with the bond issuance process, which involves creating a detailed plan that outlines the purpose of the issuance, issuer details, bond name, bond code, quantity, par value, type, term, interest rate, and payment schedule Additionally, issuers must establish a contract with a bank to manage their bond accounts effectively.
Upon completing the bond issuance documents, the issuer must provide information to potential investors and submit it to the HNX at least three working days prior to the issuance date Following the sale of bonds, the issuer and investors will enter into bond sale and purchase contracts, with investors making deposits and payments to the issuer The issuer is then required to disclose the bond issuance results to bondholders and report these results to the HNX within five working days after the issuance concludes Once this information is published on the HNX corporate bonds page, the securities company and securities depository center will issue bond ownership certificates to the bondholders.
On the scheduled payment date, the Issuer disburses principal and interest to bondholders, while also maintaining transparency by regularly reporting on the utilization of the capital raised from the bond issuance until its maturity This ongoing disclosure allows HNX to effectively monitor and manage the bond's status.
Casablanca JSC is initiating the bond issuance process for the Léman Cap Residence (LCR) project, following a contract with Vietnam Assessment and Evaluation Assets JSC (VAAE) to appraise the project, which was valued at VND 598,909,000,000 Based on this valuation, the company aims to raise VND 240 million through corporate bonds To facilitate this, Casablanca JSC has entered into a bond issuance advisory and underwriting contract with Bao Viet Securities Joint Stock Company and a bond account management service agreement with Nam A Commercial Joint Stock Bank The primary goal of this bond issuance is to enhance capital for investment in the LCR project, with all proceeds allocated specifically for its development CT Land is collaborating with BVSC to finalize the bond issuance plan.
Table 2 1 Information of Casablanca Bonds
Issuer Casablanca Joint Stock Company
Type of bond Corporate, non-convertible and secured bonds
Currency Viet Nam Dong (VND)
Coupon rate Fix interest rate 11.5%/ year
Source: Casablanca JSC – CT Land
At the end of the issuance, the Bonds are issued to a total of 4 investors, including 1 institutional investor and 3 individual investors.
Table 2 2 Information of Casablanca Bondholders
No Name Volume Value (VND) Proportion (%)
Source: Report on bond issuance results-Casablanca JSC
CT Land periodically disclosed information on the use of capital mobilized from bonds to the bondholders and report on HNX:
Table 2 3 Situation of using capital raised from Bonds
No Project using capital from bonds
1 Invest to develop Léman Cap
January 2022: Pay to X Joint Stock Company.
2 Invest to develop Léman Cap
February 2022: Pay to X Joint Stock Company.
Source: Report on capital using - Casablanca JSC
Payment of bond principal and interest process
The payment of bond principal and interest at CT Land Corp occurs in step 6 of the bond issuance procedure, following the bond's market release This process spans from the initial planning phase of bond issuance to the maturity date Consequently, the analysis of bond principal and interest payments is divided into three stages: prior to bond issuance, immediately after the bonds are issued, and during the interest payment period.
Corporate bonds are issued by companies based on self-borrowing and self-repayment, emphasizing the issuer's responsibility for debt obligations Given the high risk associated with real estate bonds, investors prioritize the purpose of the bond issuance, the secured assets, and the issuer's ability to repay debt to safeguard their principal and interest Consequently, beyond adhering to legal regulations, issuers must demonstrate their creditworthiness and debt repayment capability to attract bond investors.
Finance Department is in charge of projecting the cash flow of the project from the time issuing the bond until the bonds matures
The bond issuance for the LCR project is backed by land use rights for a 2322 m² area in Ward 2, Vung Tau City, valued at VND 598,909,000,000, as per the Valuation Certificate from Viet Nam Assessment and Evaluation Assets JSC - Ho Chi Minh branch Additionally, the issuance is guaranteed by CT Land Corp.
Casablanca JSC will utilize two primary cash flows to meet its bond principal and interest obligations: the company's existing cash reserves and the cash flow generated from operating activities, including the sale of apartments and shophouses from the LCR project By analyzing projected revenue data from ASD and construction cost estimates from the Project Development Department, and with guidance from my manager and the Feasibility Study team, I was able to forecast the cash flow for the period of 2021-2023, as illustrated in Table 2 below.
Table 2 4 Projected cash flow plan for bond principal and interest payment
2.2.2 When the bonds have just been issued.
The Issuer will pay the Buyer interest on the Deposit at an annual rate of 8.0% from the payment date until the Signing Date of the Bond Purchase Agreement This interest will be disbursed to the Buyer within three working days following the Signing Date, calculated according to a specified formula.
Interest = [Deposits] * [Interest Period] * [Interest rate]
The interest period is determined by the number of days from the date the Buyer pays the Deposit, or the next working day if the Deposit is paid after 4:00 p.m., up to, but not including, the Signing Date of the Bond Purchase Agreement The applicable interest rate is 8.0% per year.
Deposits can be received from 8:30 AM to 4:00 PM on all working days, starting from the deposit registration date until one day before the signing of the Bond Purchase Agreement If the Buyer transfers the deposit after 4:00 PM, the Deposit Date will be noted as the following working day.
Bonds will have their principal repaid on the maturity date unless redeemed early, with interest paid every six months through BVSC – Ho Chi Minh City branch If an Interest Payment Date falls on a non-working day, it will be moved to the next working day For example, 18-month bonds issued on November 22, 2021, will have three interest payments: the first on May 22, 2022, the second on November 22, 2022, and the final payment on May 22, 2023.
Periodic interest is calculated according to the following formula:
Interest received in each period = Interest before Tax – Personal income Tax
Institutional investors are exempt from Personal Income Tax, while individual investors have 5% of their profits withheld by the Issuer to cover their personal income tax obligations, in compliance with current laws, which may change at the time of payment.
[Number of bonds] * [Par value] * [Interest rate] *
In which, the number of holding days is counted from the beginning of interest period to the date of interest payment
The issuer is required to fully and timely repay the principal amount of the Bonds, totaling VND 240 billion, to the Bondholders on the maturity date of May 22, 2023.
At each interest payment period, the interest payment process for bondholders carried out by Finance Department takes place as follows:
The Finance Department of Casablanca JSC has formally requested BVSC to issue a notice regarding interest payments, enabling the company to allocate funds for timely disbursement to bondholders In response, BVSC provided a detailed list of bondholders, which includes essential information such as investor type, name, ID number, address, bank account number, and the number of bonds held, along with an official letter confirming the interest payment to the issuer.
Based on information from BVSC, FD checks and together with BVSC calculate the interest payable to bondholders
For example, in the first interest payment period, an institutional investor, Logistic
F Limited Liability Company, buys 2.100 bonds and the interest is calculated starting from 17/02/2022 As of 22/05/2022, the bondholder has held the bond for
94 days Logistic F LLC, does not have to pay personal income tax, so the interest profit received is VND 6.219.452.055 (calculated by 2.100*100.000.000 * 11.5% *
Investor Ms Nguyen Ha A purchased 200 bonds, with interest calculations commencing on December 2, 2022 By the time of the first interest payment, she had held the bonds for a total of 171 days, resulting in a significant profit before tax.
Ms Nguyen Ha A have to pay the personal income tax of 5%, equivalent to the amount of 53.876.712 ((5%* 1.077.534.247) so the actual interest profit received is VND 1.023.657.535.
The updated figures will be presented in a table detailing the calculation method and the final interest amounts owed to each bondholder (Annex 2) This interest calculation sheet will accompany the payment request submitted to the Board of Directors Once the final amounts are determined, FD will propose the payment to the BOD for approval (Annex 3) Upon receiving BOD approval, the Accounting Department will process the payment to BVSC to fulfill the obligations to the bondholders.
Table 2 5 Interest paid to bondholders on the first interest payment period
No Name Interest begin date
Source: Casablanca JSC – CT Land
After completing the payment of interest to the Bondholders, BVSC sends the
Issuer an official letter notifying the bond payment.
Overall assessment of issuing corporate bonds procedure at CT Land Corporation
CT Land ensures a rigorous bond issuance process that adheres to state laws and HNX requirements, facilitated by a partnership with the reputable BVSC Securities Company This collaboration enables CT Land to leverage BVSC's extensive customer network, streamlining the search for bond investors Additionally, the implementation of a "24-hour principle" and digitized approval processes allows for swift review and approval of submissions by the Board of Directors, typically within one day of submission.
The interest payment process involves a comprehensive appraisal of the project's value by a reputable organization prior to bond issuance, which mitigates risk and provides a reliable debt repayment source for investors This enhances the company's creditworthiness and boosts investor confidence in purchasing bonds Furthermore, all interest calculations are meticulously verified by both the Issuer and the Securities Company, with written notifications provided to ensure accuracy.
The Back Office of the Finance Department oversees the process, with each project assigned to a specific employee All tasks at each stage are submitted for review and evaluation to the Manager, followed by the CFO and Board of Directors, who will correct any identified mistakes.
CT Land faces significant risk control challenges in its corporate bond issuance, primarily due to the reliance on real estate as secured collateral The lengthy timelines for project completion and profit realization lead to uncertain revenue streams, contributing to a low liquidity ratio Furthermore, the potential for value depreciation in future projects amidst market fluctuations raises concerns about the company's ability to meet bond principal and interest obligations.
CT Land Corp, as a private entity, can only issue bonds through private placement, which limits the number of investors, typically to individual investors Unlike publicly offered corporate bonds that are registered with the State Securities Commission, private placements do not require regulatory licensing Consequently, CT Land Corp faces higher interest rates for bondholders and incurs substantial additional fees for services such as appraisal, advisory, underwriting, and account management.
THE OUTLOOK, RECOMMENDATIONS FOR
Outlook of CT Land Corporation
The bond market presents significant potential due to its comprehensive legal framework, which has evolved to enhance bond issuance as a crucial capital-raising channel for enterprises Since the implementation of Decree No 163 until the end of 2019, there have been 848 corporate bond issuances, amounting to an impressive VND 259,377 billion This substantial figure underscores the bond market's promising development and its effectiveness in addressing the financial needs of businesses.
The demand for corporate bonds is increasing among investors, including individuals, due to their higher returns compared to savings deposits In 2020, corporate bond yields were 0.8% to 1.7% per year above deposit interest rates at commercial banks, and this gap is expected to widen in 2021 and 2022, particularly as banks lower their interest rates.
With 30 years of experience in real estate development, CT Land is set to launch an IPO in 2022-2023, aiming to secure long-term capital and boost brand awareness This strategic move positions CT Land advantageously as Vietnam enhances credit ratings for bonds, promoting greater transparency in the corporate bond market.
Figure 3 1 Corporate bonds issuance in the first 6 months of 2022
January February March April May June
The Vietnamese bond market presents a significant challenge for the company, particularly concerning real estate bonds, which are currently plagued by issues related to legal violations in capital mobilization from bond issuance This situation marks a critical turning point for corporate bond fundraising, exerting pressure on banks and adversely impacting real estate businesses and investors involved in the market.
The Ministry of Finance is set to enhance regulations governing corporate bond issuance to address existing challenges, including stricter conditions and increased sanctions to bolster deterrence The forthcoming revised Decree 153 mandates that businesses must register and trade their bonds through the official market This new requirement presents a significant challenge for CT Land, as the company is not publicly listed and can currently only issue private placement corporate bonds.
One of the key challenges that enterprises, including CT Land, encounter when issuing bonds is the need for self-improvement in governance, finance, and information transparency to align with market demands.
3.2 Recommendations for improvement of Corporate Bonds Principal and Interest Payment Process at CT Land Corporation
CT Land will coordinate with relevant parties to enhance corporate bond transactions in the secondary market A vibrant secondary market allows for the wholesale and retail sale of bonds to a broader audience, improving liquidity and making the market more appealing This, in turn, facilitates primary issuances for businesses, enabling them to raise capital for production and growth.
CT Land must enhance its risk management by adhering strictly to financial governance through effective risk control measures and compliance with regulations for financing and investing activities Additionally, the company should closely monitor its liquidity and implement a robust risk assessment mechanism to analyze actual cash flows from ongoing projects, allowing for the early detection of cash flow risks This approach will improve creditworthiness and bolster investor confidence in purchasing bonds.
To optimize its capital costs, CT Land should cultivate strong relationships with both domestic and international financial institutions, including banks and investment funds, to access diverse capital sources through various channels such as credit, shares, bonds, and derivatives The team responsible for capital raising must stay informed on newly enacted regulations and laws regarding bond issuance, closely monitor market trends, and make informed investment decisions to ensure readiness for future issuances, updating necessary documentation as needed.
CT Land aims to enhance its human resources by stabilizing the personnel structure of its Finance Force, with a particular focus on the Finance Department The company plans to implement ongoing advanced training for all Finance Force staff and develop a comprehensive HR plan for the next five years To achieve these goals, CT Land will foster partnerships with leading universities in Ho Chi Minh City, such as Foreign Trade University, University of Economics Ho Chi Minh City, and Banking University of Ho Chi Minh City, to tap into a pool of young and talented professionals.
Corporate bonds serve as a vital capital mobilization tool in developed countries, proving to be highly effective for businesses In Vietnam, the current capital and financial market make bond issuance an optimal choice, particularly for real estate companies that require significant funding for housing projects, commercial centers, office buildings, and infrastructure development Consequently, capital raised through bonds remains a crucial "lifeline" for numerous real estate firms, including CT Land.
Despite existing challenges in capital mobilization through corporate bond issuance, CT Land aims to leverage its strengths to enhance the bond issuance process while ensuring timely principal and interest payments to bondholders.
CT Land must implement coordinated measures that align with the Company's primary efforts, supported by the Government, the Ministry of Finance, the State Securities Commission, and both the Ha Noi and Ho Chi Minh Stock Exchanges, along with other relevant agencies.
This mid-course internship report outlines the corporate bond issuance procedure, with a focus on the bond principal and interest payment process at CT Land Corporation Drawing from my university education and five weeks of hands-on experience in the Back Office - Finance Department, I acknowledge that the brief internship duration posed challenges in fully grasping the entire process Nevertheless, I am deeply grateful for the invaluable experience and the supportive guidance from both the staff and my professor.
While my suggestions may not be exhaustive due to my limited expertise, I genuinely hope that my recommendations contribute positively to CT Land's bond issuance activities I have strong faith in the company's sustainable development and look forward to witnessing its continued success and remarkable achievements in the future.
1 CT Land 2021 CT Land Profile
2 CT Land 2021 CT Land Business Plan
3 CT Land, 2022 Quy trình phát hành trái phiếu
4 CT Land, 2021 CT Land Quarterly Consolidated Financial Statements
5 CT Land, 2020 CT Land Consolidated Financial Statements
6 CT Land, 2019 CT Land Consolidated Financial Statements
7 CT Land, 2018 CT land Consolidated Financial Statements
8 The Government, 2018, Decree No 163/2018/ND-CP about Issuance of Corporate Bonds
9 The Government, 2020, Decree no 153/2020/ND-CP prescribing private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market.