Bond outline gets thumbs down

They claim that the new regulations failed to reflect their suggestions for resolving difficulties and energising the market.

The guidelines are specified in Circular 211/2012/TT-BTC, part of Decree 90/2011/ND-CP.  Most the complaints - expressed by members of issuance advisory firms, law firms and the Vietnam Bond Market Association (VBMA) - focused on the not yet clarified regulations about requirements for bond issuers.

The individuals requested anonymity due to sensitive relations with authorities. “Circular 211 only solves some small issues, not solve our main problems during the process of working with companies,” said the director of one finance house. “I had not expected that the Circular would have been so unrealistic.”

One complaint  is that Decree 90 requires the company desiring to issue bond must not have a “modified opinion” in its audited report at the time of issuance, but the Circular 211 does not clarify whether the report here may be a consolidated or unconsolidated report.

Secondly, Decree 90 requires the issuer not to  post loss in the latest quarter in the latest annual report at the time of issuing. However, Circular 211 offers no guidance regarding the companies that do not have an annual audited report at the time of issuing.

Moreover, they said the Circular did not properly set financial parameters that make companies eligible to issue bonds, although many market participants had suggested that the Ministry of Finance (MoF) adjust this regulation in this circular to help companies with a slight loss able to issue bond.

Further, they questioned why the Decree 90 required the issuer to have at least 20 per cent of equity capital in its project which the issuer raised debt for - but does not clarify when  this ratio is to be calculated in the development process. Market participants raised other points of concern, such as the procedures for disbursing the issuing proceeds, that  they said Circular 211 does not thoroughly solve despite their input in the process.

The director for corporate finance division of a brokerage house said there were up to seven companies he had approached to advise on issuing bonds. But those companies had to back off due to just one problem among the aforementioned concerns. One enterprise, for example, had only debuted nine months earlier and lacked an annual audited report.

A bank executive, who also advises companies on bond issuances, talked of similar clients backing away from deals because of the new guidelines. He cited the parent company of a big group that has clean unconsolidated report   but its unconsolidated report included modified opinion due to problem of a subsidiary. “There is a big possibility for authorities to question this modified opinion in accordance with the Decree 90 and we cannot get the approval for the issuance,” the banker said. “I understand that they have to obey the law, but I also had hoped that the new circular will be more helpful for bond issuers.”

A member of VBMA told VIR that all the problems for companies in issuing bond had been raised to MoF during the time collecting ideas for the Circular 21.

“But the Circular has not satisfied the main part of the association’s expectation.”