Vinashin to not go belly up

Speaking at a government press conference in Hanoi last week, Deputy Prime Minister Nguyen Sinh Hung said the government would give financial assistance to the group to restructure debts and implement uncompleted shipbuilding projects.

“The situation has not yet slipped out of our hands. If we restructure and put it [Vinashin] into operation, we will continue to have a shipbuilding industry. But if we let it go bankrupt, its  projects and factories will just be heaps of scrap iron,” Hung said.

He added the government “will create a new Vinashin specialising in the shipbuilding industry”.

According to a Government Office announcement, the government will provide enough chartered capital to Vinashin from the state’s Fund for Supporting and Restructuring Enterprises and provide loans mobilised from suitable financial sources, including bond issuance.

Hung’s words come one month after the government announced a comprehensive restructuring plan for Vinashin, dispelling concerns over the group’s possible bankruptcy.

Vinashin is now flooded with debts and in danger of losing several shipbuilding contracts from international clients.

Vinashin clients have already cancelled $8 billion in shipbuilding contracts and agreements signed with the group over the past two years and possibly another  sum of $700 million this year.

According to the government’s announcement, Vinashin’s total debts are $4.5 billion while its total assets are around $5.4 billion. The debt to equity ratio is 11.

Though the government said it would not let Vinashin go bankrupt, Hung said the group should not entirely be dependent on the government’s assistance.

“First of all, Vinashin has to take the initiative to settle its financial trouble by withdrawing capital from non-necessary investment projects, equitising subsidiaries, sell or transfer assets outside its shipbuilding core business,” Hung said.

After being restructured, Vinashin will have to focus on its core operations in the  shipbuilding industry.

Last month, Vinashin was forced to transfer 13 investment projects and subsidiaries to the state’s oil and gas giant PetroVietnam and the country’s flagship  maritime group Vinalines.

The government announced that Vinashin’s investment projects had dropped from 195 to 28 over the past two years. Currently, the group is focusing on implementing only 13 key shipbuilding projects.

The government expected Vinashin would suffer losses in the next two years and start to make profits from 2014.

From 2015, the group’s business operations are expected to be stabilised.