MoF gears up for bond issue

Nguyen Thanh Do, head of the Ministry of Finance’s External Financial Department, said that a specific plan to issue government bonds on the international market had “been submitted to the government and waits for a final approval”. Do, however, did not elaborate further and rejected the rumour that $500m in bonds would be issued this time around.
The sum mobilised from the issuance is set to provide capital to large scale projects.
In October last year, Vietnam raised enormous attention of international investors when it floated $750 million bond, its first sovereign debt issue on the international market, attracting orders 6.5 times bigger than offer.
The government’s plan on the second release of bonds has gained special interest from international investors who consider Vietnam one of best destinations for both direct and indirect investment.
Credit Suisse managing director Jose Isidro Camacho said that several international investors would flock to Vietnam’s bonds if they were issued right now.
“There are many advantages for Vietnam’s economy at present such as an upgraded credit ranking, improved prestige, and especially the robust demand of foreign investors for investment via bonds,” he said.
Camacho said that Vietnam’s improved status on the world economy would ensure an attractive interest rate for the bonds, bringing benefits to the issuer.

Recently, leading global credit rating agency Standard & Poor’s, upgraded Vietnam’s foreign currency rating by one notch to BB (from BB-), and local currency rating to BB+ from BB, in recognition of international investor confidence in the country’s positive economic growth and reforms.
Meanwhile, Vietnam is expected to become an official member of the World Trade Organization by the end of this year following 12 years of pursuing entry into the world’s largest trade body.
Aaron Russell Davison, vice president of Credit Suisse said that the trading yield for 10-year bonds on the international market was now just 6.25 per cent, much lower than the 7.125 per cent level that Vietnam’s government committed to pay to international holders of Vietnam’s bonds last year. He was optimistic about the second release of bonds, if approved, adding that they would provide a good benchmark to the Vietnamese government.
Do said that the government was considering issuing bonds to mobilise capital, which will then be lent to domestic enterprises, or a scenario where local companies will issue bonds and the government will play the role as underwriter on the international market.
PetroVietnam, Electricity of Vietnam, Vietnam National Post and Telema-tics Corporation and Vina-shin are all potential candidates to be issuers of corporate bonds on the international market.
Pham Thanh Binh, Vinashin’s general director, said that Vinashin would need around $3.8bn for investment capital until 2010 and it was expected that the corporation would issue corporate bonds on the international market in middle of next year.




No. 785/October 30-November 5, 2006c