Vinapaco restructuring stuck in limbo

Vinapaco's divestment Phuong Nam Pulp Mill has been unsuccessful multiple times

Being one of the unprofitable businesses of Vinapaco, Phuong Nam Pulp Mill has been put on auction with two extensions in 2017. Nevertheless, the project is still “up for grabs” since no investors seemed to be interested.

In February 2018, the Ministry of Industry and Trade (MoIT) proposed the government to approve specific incentives for the projects, which is similar to Decree No.61/2017/ND-CP detailing the initial valuation of bad debts, collateral assets for bad debts.

Accordingly, if the first auction fails, the firm will be permitted to reduce the initial price by 10 per cent (no more than twice) in the following sessions. Moreover, in case there is no buyer even with the discounted price, it is proposed that Vinapaco will appraise its financial capacity as well as its ability to repay debts and then report to the government to set a new discount for the next auctions.

In its recent report to the MoIT, Vinapaco stated that some investors have expressed interest in buying the mill, however, the approved auction dossiers have ceased to be effective.

“We are looking for a contractor to reappraise Phuong Nam Pulp Mill’s fixed assets and inventory, then continue with the auction,” said a representative from Vinapaco.

Notably, the management board has admitted that even if the firm is reappraised, it is uncertain whether a subsequent auction will be successful. This project has remained unsolved for a long while, affecting the progress of Vinapaco’s privatisation.

Dang Quyet Tien, head of the Ministry of Finance’s Department of Corporate Finance, said that while Vinapaco is making efforts to deal with Phuong Nam Pulp Mill, they will likely face numerous difficulties.

“The project may not be sold and the mill will go bankrupt or it will need to convert into a new business model,” Tien stated.

Phuong Nam Pulp Mill is not the only obstacle, legal difficulties may push Vinapaco to give up on privatising its three remaining branches and has made it impossible to privatise Vinapaco itself and its subsidiary Southern Paper Materials Company scheduled by 2018.

Furthermore, Vinapaco is at a standstill in its attempt to divest from its other businesses, namely Tan Mai Group JSC and BBP Paper JSC. Specifically, Vinapaco has offered to sell its capital in Tan Mai Group twice and even gave out a 10 per cent discount on the remaining shares it holds, but still found no interested investors.

The latest solution is to list Tan Mai Group on the Unlisted Public Company Market (UpCOM) on the Hanoi Stock Exchange (HNX) in order to complete the divestment by 2021.

Vinapaco’s capital of VND52 billion ($2.26 million) in BBP Paper Company shows no brighter prospects as BBP’s accumulated losses hit VND218 billion ($9.48 million) in 2014, 96.54 per cent of the owners’ equity. In 2015, the company continued to lose VND45 billion ($1.96 million), after which BBP has been brought to a halt by piling up difficulties.