Ministry to continue tightening bond market after Tan Hoang Minh scandal

April 06, 2022 | 10:16
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After the cancellation of nine bond issuances of Tan Hoang Minh Group, the Ministry of Finance (MoF) is drafting, amending and supplementing Decree 153 on offering and trading corporate bonds, which proposes stricter condition for bond issuers, especially in private placement.
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Money being counted at a bank office. Photo

According to current regulations, enterprises mobilise capital through private offerings following the principle of self-borrowing, self-paying, self-responsibility, while State management agencies do not issue issuance permits.

However, MoF said that there are still small-scale enterprises that mobilise capital in large volumes, with high interest rates and without collateral or with poor quality of collateral.

"There are risks in case these enterprises issue bonds, because if their production and business activities struggle, they cannot repay the principal debt and interest to investors," said the Department of Banking and Financial Institutions.

"Due to their higher risk nature, private placements are only suitable for professional investors who are able to analyse and assess risks and have financial ability."

The ministry said that it has assigned the Department of Banking and Financial Institutions to draft documents and report to the Ministry of Justice for assessment of the draft amendment and supplement to the Decree 153 on offering and trading corporate bonds.

The draft decree proposes stricter conditions for bond issuers, especially in private placement.

Of which, for businesses with high debt ratios, depending on the extent, there will be requirements for collateral in order to improve safety conditions. In addition, there will be a bond trading exchange for businesses to register and trade on the exchange, meaning there is no longer an agreement transaction.

According to a representative of MoF, businesses offer bonds to every investor, regardless of who they are. Many investors, who are not professionals or know nothing about stocks and bonds, see high returns, so they invest. Therefore, the key is that investors need to be professional to avoid risks.

"Currently, regulations on professional investors are still loose, so bond sales advisors still have ways to turn amateur investors into professionals. Imposing stricter conditions is also a way to protect investors. MoF is working urgently to enact the draft in the second quarter of this year," said a representative of the ministry.

The representative also said the ministry has issued many documents directing and reminding businesses and advising investors when participating in the corporate bond market. However, there have been many violations.

MoF also said that enterprises that issue bonds must comply with and respect the law while participating in the market. Those violating laws to take advantage to manipulate the stock market will be strictly fined, creating an open and transparent stock market – a channel to raise capital for socio-economic development.

Previously, on April 4, the State Securities Commission (SSC) announced the cancellation of nine bond issuances from July 2021 to March 2022 by companies under Tan Hoang Minh Group, with a total value of over VND10 trillion (nearly US$439 million) for disclosing false information and concealing information in private offerings.

All three companies, Viet Star Real Estate Investment Company Limited, Winter Palace Joint Stock Company, and Soleil Hotel Service and Investment Joint Stock Company are not public companies.

According to information published by the Ha Noi Stock Exchange (HNX), buyers of these nine bond issuances were all institutional investors.

Specifically, in the three bond offerings of Winter Palace Company, the company did not publicise information of investors of one offering, while the other two are owned by KIS Vietnam Securities Corporation.

Regarding two bond issuances of Viet Star Real Estate, investors are Agribank Securities JSC and Tan Hoang Minh Hotel Service Trading Co., Ltd (Tan Hoang Minh Group).

Soleil Company issued bonds three times, with one belonging to An Binh Securities JSC while the other two are owned by Agribank Securities JSC.


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