Companies stick with bond plans

Several Vietnamese firms plan to issue bonds this year despite international concerns

A senior leader of the coal and mineral group Vinacomin revealed last week that it planned to apply for government approval to issue international corporate bonds worth $500 million  this year. These bonds were originally planned for last year and then halted because of unfavourable market conditions.

According to the official, Vinacomin is now among the few state-run groups capable of making international bond issuance, thanks to its strong management capacity over its resources.

Vinacomin had to stop the offering of the $500 million international bonds late last year because of the state-run Vinashin’s financial woes, which triggered the shipbuilding group’s resutructuring and government’s interference to avoid a collapse.

After reporting overall debts amounting to at least VND86 trillion ($4.4 billion) last year, in December 2010 Vietnam’s largest shipbuilder Vinashin was reported for failing to meet the deadline to pay the first $60 million installment on a $600 million debt to international lenders.

Global ratings agency Standard & Poor’s then lowered Vietnam’s sovereign credit rating. Earlier, Moody’s Investors Service also downgraded Vietnam’s government bond rating to B1 from Ba3, citing rising inflation and Vinashin’s debts.

 “The Vinashin case seriously impacted the image of Vietnam in general and state-run groups in particular while some investors raised their interests to much higher levels, making us unable to accept,” the Vinacomin official said.

The group is, however, determined to go ahead with the international bond issuance plan this year in order to raise essential funds for its major coal, power and bauxite projects to be developed in 2011.

Vinacomin reported a total investment VND22.5 trillion ($1.15 billion) in operations in 2010, 26 per cent lower than its original plan of VND30 trillion ($1.53 billion). It has planned to raise its investment to some VND41 trillion ($2.1 billion) this year.

According to Sean Doyle, ambassador and head of the European Commission’s delegation in Vietnam, it was a big risk when a company default on the loan, which made everybody suffer.

“We hope to see a policy [from the government] which will restore confidence. That is really important for investors and also for the Vietnamese people. The question is in transparency and responsibility. It is all there,” Doyle said.

“However, I think that the government is aware of that. A lot of things have been done in order to deal with the Vinashin situation. Progress has been made,” the ambassador noted.

The other state-run power producer Electricity of Vietnam (EVN) is also pursuing the government’s permission for a $1 billion international bond sale planned for this year.

“We are currently waiting for the Ministry of Finance (MoF)’s approval for developing the overseas bond sale project,” said EVN’s deputy general director Duong Quang Thanh.

He noted, however, that it would be very challenging for the group to be capable of raising funds from overseas investors due to the low sovereign credit ratings given to Vietnam and its state-run enterprises by international credit agencies.

“If the market does not accept us, the government’s permission will be in vain. However, we still need to go ahead to test the market,” Thanh said.

EVN plans to invest some VND55.3 trillion ($2.83 billion) into operations this year, up from VND45 trillion ($2.3 billion) in 2010.