Legion of unexpected bad debts sends Vinawaco reeling

Vinawaco has just sent two urgent dispatches to the Ministry of Transport (MoT) and the Hoan Kiem District (Hanoi) Division of Civil Judgement Enforcement requesting to speed up the valuation of state capital at the moment of its equitisation (May 30, 2014) and delay the forced debt collection for two judgements pronounced by the Haiphong People’s Court in 2016 and the Ho Chi Minh City Peoples’s Court in 2004.

“These two requests are actually linked together, since only when MoT determines the amount of state capital at the time of equitisation will we have a basis to pay the company’s liabilities in accordance with the law,” said Ngo Van Tuan, chairman of the board of Vinawaco.

In particular, regarding the VND560 million ($24,634) debt to Minh Duong Company, according to the judgement of the Haiphong People’s Court in 2016 (Case No.18/KDTM-PT), Tuan said Vinawaco is prepared to pay the amount to a temporary holding account appointed by the court, but asked to wait until the company completes the second valuation of state capital and finishes the handover from state-owned enterprise to joint stock company.

Meanwhile, regarding the VND7 billion ($307,930) debt pronounced by the Ho Cho Minh City People’s Court in 2004 (Case No.284/CNTT-TT), Vinawaco argued that the company is not accountable to pay since this debt was never mentioned when MoT approved the company’s value for equitisation. Furthermore, this debt belonged to No.2 Waterway Dredging Company, a special accounting unit with its own legal status in which Vinawaco is only a shareholder with 20 per cent of the chartered capital.

According to Vinawaco’s leader, the constant revelation of debts and losses from the previous management period is becoming a nightmare. Most recently, a 22-year-old debt of VND53 billion ($2.3 million) from Vietcombank was unearthed in September 2016, after Vinawaco received information on bad debts at Vietcombank amounting to VND12.6 trillion ($554.2 million).

“The revelation that Vinawaco has bad debts at Vietcombank damaged the company’s reputation and business plan, especially in accessing credit and applying for performance and payment guarantees,” Tuan said.

Vinawaco explained that according to documents provided by Vietcombank, this debt is the arrears from when the corporation received handover for three cargo ships in 1995.

Recent audit revealed a substantial bad debt towards Vietcombank from 1995

However, Vinawaco also affirmed that the company performed debt reduction accounting in 2005 and has not received any debt reconciliation records from its Ho Chi Minh City branch, thus there is no payable to Vietcombank in Vinawaco’s business valuation records for equitisation published by MoT.

Aside from the sudden revelation of the debt to Vietcombank, in just three years since equtisation, Vinawaco has discovered at least 14 losses and debts totalling at VND137 billion ($6 million).

Most of these debts and losses were confirmed by independent accounting firm BDO Audit Services Co., Ltd. for the period between receiving the first business license and business valuation (July 1, 2013 to May 29, 2014).

The most notable of these debts and losses are payable to six clients, including VND66 billion ($2.9 million) in bad debts to banks and unfinished costs totalling at VND38.2 billion ($1.7 million) from 25 construction works prior to 2013 that do not correspond with revenues, which are irrecoverable and were rejected by the tax departments of Hanoi and Haiphong.

“All of these liabilities were either missing in the business valuation record for equitisation or were listed at lower value than the actual payables. Since the state holds 30 per cent of Vinawaco’s charter capital, or VND109.8 billion ($4.8 million), the state capital will actually be negative VND30.3 billion ($1.3 million) after these debts are processed,” Tuan said.

It is worth mentioning that since 2016, Vinawaco has more than once requested MoT to promptly revaluate state capital in the company at the time of equitisation, but so far, three years after equitisation, the revaluation has yet to be completed.

Previously, in November 2016, in the instructions on handling the differences between the statistics of independent auditors and tax agencies, the Ministry of Finance has requested MoT to quickly determine the causes and responsible parties for these unusual differences.

Vinawaco’s leader said that the company is in hot water as the Hoan Kiem District Division of Civil Judgement Enforcement has frozen its assets as well as requested Thanh Hoa Bypass BOT to cease payment for Vinawaco’s construction work in the project for foreclosure.

“Our strategic partners, Infrastructure Development and Construction Co., Ltd. (currently holding 30 per cent of the chartered capital), and other big shareholders (holding 30 per cent of the chartered capital in total) wish MoT would promptly finish dealing with these financial problems before handing the right to represent ownership of state capital to State Capital Investment Corporation,” Tuan said.