VIETNAM’S property debt crisis has intensified, after the country’s second-largest developer joined the ranks of peers failing to repay a bond on time and seeking debt extensions.

No Va Land Investment Group, better known as Novaland, said earlier this week that it would delay repayment of a 1 trillion dong (S$56.2 million) note originally due on Feb 12. It asked holders for an extension, or to convert the principal into its real estate products. The developer said it was seeking to work out a way within two months for it to pay off the debt.

Novaland is the latest addition to an expanding group of Vietnamese developers that have been late on debt payment, indicating a widening cash crunch in the sector after an anti-graft campaign spooked investors and new bond issuances plunged. With billions of dollars of bonds due this year, the industry’s woes risk triggering a broader crisis in the Vietnamese banking sector and economy.

Xavier Jean, an analyst at S&P Global Ratings, said: “We believe this is just the beginning, and expect more debt extensions, restructurings and defaults.” He added that S&P was “watching for a contagion effect” that could spill over to companies beyond the construction sector.

The South-east Asian nation’s property crisis started last year, after officials issued a crackdown on corporate bond issuance following allegations of illegal activities. This set off a series of actions to rectify the property market, including high-level arrests, inspections of brokerages tied to cancelled issuances, and an overhaul of the bond industry.

Citing estimates by the Ho Chi Minh City Real Estate Association, a trade ministry publication last week showed that real estate firms had 130 trillion dong worth of bonds maturing this year.

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Hanoi Stock Exchange data showed that prior to Novaland’s latest announcement, industry peers Tan Hoang Minh Group, Van Thinh Phat Holdings Group and Sunshine Group had also sought to extend bond payment deadlines.

Novaland’s shares fell as much as 4.2 per cent on Thursday (Feb 23) morning, after plunging 6.6 per cent the previous day.

Vietnam’s Ministry of Finance proposed a decree amendment that would let companies extend corporate bond maturities by as long as two years to ease a funding shortage, a local newspaper reported last December. The trade ministry’s publication said the draft revision, which has been submitted to the government, also includes allowing bond principal and interest to be converted into loans or other assets.

In an investor note on Wednesday, SSI Securities said: “What will happen next – and whether a cross default contagion is to occur or not – will remain as the big concern to the market right now. What is a must right now is for the issuer to convene a bondholders’ meeting to discuss solutions, including redemption, further guarantees, or a waiver of default.” BLOOMBERG