A bumpy road for Mai Linh taxi

Huy has received more than VND2.75 billion ($132,000) to address "personal financial needs” after selling 888,000 MNC shares to an individual investor, Ngo Van Kieu, according to the Hanoi Stock Exchange (HNX).

The sale, worth more than VND2.75 billion, were traded via negotiation, and another 100 MNC shares were traded via order matching, according to recent data from the Hanoi Stock Exchange (HNX).

With the divestment, Huy has reduced his holding percentage in MNC from 12.66 per cent, or more than 1 million shares, to 1.65 per cent, or around 133,200 shares.

Before that, Mai Linh Group registered to offload MNC shares to decrease its holding in Mai Linh Central from 48 per cent to 6 per cent.

On December 28, on the official website of Mai Linh Group, Ho Huy posted a message calling all employees to support the firm to overcome the current difficulties by voluntarily contributing one day's earnings to the firm, while senior officials were recommended to voluntarily cut their salaries.

Confirming his wish to keep the jobs of all 28,000 workers, the Mai Linh chairman also wishes investors reschedule debt payment terms and extend business contracts, and that the company receives financial support from the State.

Bumpy road to restructuring

According to the information Ho Huy presented at a press conference on December 22, Mai Linh is determined to implement a restructuring plan for its business activities as well as strategies.

Specifically, its provincial subsidiaries will be scaled down into branches, real estate assets will be sold so that the firm and all its branches will have to use leased offices, and all the operations will be rearranged for cost cutting.

Huy also said it would abandon all the long-haul transportation trips suffering losses, while profitable trips will be passed on to investors, officers and employees for divestments so that the mother firm will have enough money to stay focused on taxi transportation, especially in the two biggest cities, Hanoi and Ho Chi Minh City.

The return to the taxi sector is probably the most viable solution, due to the fact that this is the most powerful and most profitable segment of Mai Linh. In the first six months of 2012, revenue from the company's taxi service reached VND1.137 trillion, accounting for the largest proportion of the total revenue of approximately VND1.5 trillion, while the cost of taxi services is VND782 billion.

However, at present, the largest taxi market fell into hands of Vinasun and so, regaining the market share from such a fierce competitor will not be easy. Vinasun has many advantages, while Mai Linh also has a lot of things to deal with, especially financial restructuring.

The recently revealed debts of about VND500-800 billion to individual investors are not the only thing to be dealt with.

Mai Linh Group currently has 28,000 employees with a social insurance debt of about VND38.7 billion. As of December 30, 2012, the total liability of Mai Linh was up to VND2.28 trillion ($109.5 million), nearly three times its total equity, of which its short-term debts were around VND1 trillion.

In the best case, if Mai Linh can sell its taxi cabs and realty assets for VND500 billion as debt repayment to individual investors, the firm will have to find financial sources to aide in relieving their remaining debt to many credit institutions.

Debt restructuring and the conversion of debt into equity for the lenders is probably the best solution for Mai Linh in its financial restructuring process.

However, whether or not the major creditor of Mai Linh, Military Commercial Joint Stock Bank (MB) and the Bank for Investment and Development of Vietnam (BIDV), will participate in this plan is another story.

Not everyone is as lucky as Binh An Seafood Joint Stock Co, whose creditor, Saigon-Hanoi Commercial Joint Stock Bank (SHB), agreed to become a strategic shareholder.