Firms raise capital through bond issues

October 13, 2011 | 11:42

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Facing difficulties in accessing bank loans at reasonable interest rates, many businesses are seeking to raise capital by issuing corporate bonds.

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Vietnam Bond Market Association general secretary Do Ngoc Quynh said raising funds through bond issues will help enterprises become less dependent upon financial institutions.

Compared to raising capital by issuing stock, bond issues will not dilute existing share values or affect ownership or control of the enterprises, Quynh added.

In recent days, three more listed companies have announced information concerning bond issue plans worth trillions of dong.

Sai Gon Thuong Tin Real Estate Co (SCR) plans to issued bonds worth VND99 billion ($4.7 million) with a term of 18 months and a floating coupon rate which will be adjusted monthly. Interest for the first month will be 17 per cent per year.

Sai Gon-Hanoi Securities Co (SHS) plans a three-tranche bond issue worth a combined VND350 billion ($16.7 million) with a coupon rate of 20 per cent, while Agribank Securities Co (AGR) also expects to issue five-year bonds worth VND3 trillion ($142.8 million) with floating interest rates.

Last month, Khang Dien House Trading and Investment Co (KDH) successfully issued VND50 billion ($2.4 million) worth of bonds at a fixed interest rate of 21.5 per cent. Song Da Urban and Industrial Zone Development and Investment Co (SJS) also raised VND700 billion ($33.3 million) by selling bonds with a coupon rate of up to 22 per cent.

The fact that companies are willing to seek funding with such high yields is a clear sign that enterprises are desperate for capital.

"This method is suitable to medium-sized and large enterprises with a high degree of transparency," Quynh said.

VIR/VNA

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