Dong Banh looks to cement future with fresh share deal

The Ministry of Construction (MoC) just submitted a proposal to the prime minister, asking to shift VND171 billion ($8.2 million) worth of shares that the Construction Machinery Corporation – Coma owns at Dong Banh Cement Vissai Group.

The MoC proposed allowing Coma to make the move, meaning that Vissai Group would replace Coma as Dong Banh Cement’s major shareholder. This would help Dong Banh Cement repay debt guaranteed  by the Ministry of Finance (MoF) following its $3.4 million credit contract with ANZ.

ANZ has reportedly urged Vissai Group to take over the Dong Banh cement project as soon as possible. If the proposal is approved, Dong Banh Cement will have more opportunity to survive the debt.

Vissai is known as one of the biggest cement groups in Vietnam, owning five cement plants with a combined capacity of six million tonnes each year. It is also a potential investor in cement businesses with remarkable export and import turnover every year.

However, Vissai is raising concerns over the weakness of Dong Banh Cement  following the MoF’s recent investigation into cement projects using foreign loans with the government acting as underwriter.

Dong Banh Cement had reportedly spent more than $7,700 of investment capital to lend with unknown efficiency whereas it was lacking capital for production and business. “Even if the proposal is approved, running the company is not all smooth sailing because of the project’s financial complexity,” said Hoang Manh Truong, chairman of  Vissai Group.

The MoF recently concluded that Dong Banh’s issues stemmed from wrongly used capital. Dong Banh Cement’s general manager must be responsible for the case, the ministry said.

Vissai’s plan to invest up to $8.2 million in Dong Banh Cement was viewed as risky by some industry insiders at this moment. Vissai, on the other hand, was trying to find solutions to mobilise capital effectively from assorted sources, according to a Vissai source.

Despite difficulties, Vissai plans to take over Dong Banh Cement also received praise as a brave move in current economic context. Meanwhile, Dong Banh Cement is fighting for survival, looking for more opportunities.

“Dong Banh Cement is desperately in need of support from Vissai, just hoping they will help us get out of the debt,” said Dong Banh Cement’s chairman Vu Van Nam.