Bond issue to float shipyard

All aboard as Vinashin expects a big cash injection from the sovereign bond issue

Sources from the Finance Ministry said the plan was to raise $500 million, and the bond issue will help create a benchmark for Vietnamese bonds abroad.
The proceeds from the bond issue are tagged to be invested in a large shipyard belonging to state-run shipbuilder Vinashin, which is receiving more orders from foreign shipping firms, along with projects for Electricity Vietnam, and Vietnam Airlines.
The announcement was a major step forward for the country’s fledgling financial markets, fund managers said.
“The fact we got the green light today is tremendous news and I’m sure it will be well received by emerging market and global bond investors,” said John Shrimpton, director of Dragon Capital in Ho Chi Minh City.
The cabinet decision published in state-run newspapers said the government “assigns the Finance Minister to coordinate with related ministries and agencies to complete the issue of the government bonds by October 2005”.
A Finance Ministry official confirmed the approval but declined further comment. “The ministry will announce details of the sale soon,” he said.
The Finance Ministry has said the issue would not only raise funds but also help create a benchmark for Vietnamese bonds abroad.
Vietnam contemplated the issue several years ago but the plan, closely watched by foreign investors, faced many challenges while the country’s sovereign ratings remained below investment grade.
However, hopes for the issue were revived in July when global rating agency Moody’s increased Vietnam’s foreign currency ceiling for bonds and notes.
The agency raised its foreign currency rating for government debt from B1 to Ba3, three notches below investment grade.
The only dollar exposure international bond investors can obtain to enter Vietnam’s market was through $543 million worth of relatively illiquid Brady bonds issued in 1998, which were part of an old debt restructuring package. By September 2002, Vietnam said it had bought back one-third of the bonds.
Analysts had said the upgrade by Moody’s could persuade Vietnam to make a fresh bond offering.
Vinashin, the country’s largest shipbuilder, has recently received orders worth more than $400 million from foreign firms to build ships with carrying capacities ranging from 15,000 tonnes to 53,000 tonnes for delivery from next year, company figures show.
State-owned Electricity of Vietnam also needs cash to develop the country’s electricity sector in the coming years.
According to EVN projections, the country plans to double its power-generation capacity to 22,500 megawatts by 2010.
Vietnam Airlines is also understood to be keen to expand its fleet, and funds from bond issues may be used to invest in such projects.