The Vietnamese corporate bond market boomed several years ago, but then stumbled last year when breaches by large corporations were discovered. Seeking capital overseas is the smart choice for enterprises at this time. 

In late 2022, HDBank announced a plan to issue $500 million worth of international bonds. The bank also asked for permission to expand the ceiling foreign ownership ratio from 18 percent to 20 percent.

The capital to be raised from bond issuance will be used as medium- and long-term capital, serving growth development plans designed by HDBank. Also, the bank wants to improve the indexes on asset quality and capital adequacy ratio to be ready for Basel III standards.

With a credit rating at B1 and a bad debt ratio among the lowest level in the banking sector, the bank’s capability of mobilizing foreign capital has been praised.

Prior to that, in 2020 and 2021, HBBank successfully issued $325 million worth of international convertible bonds to international financial institutions.

Analysts say that in recent years, large corporations are seeking foreign capital rather than domestic capital because the domestic capital market remains cool.

In June 2022, Novaland, a well-known realtor, sold lots of bonds worth VND5.774 trillion to two foreign investors led by Warburg Pincus.

Vingroup owned by the dollar billionaire Pham Nhat Vuong planned to mobilize $1.5 billion from bond issuance in the international market in 2022, but it downsized the issuance scale at the last minute.

In May 2022, the Hanoi Stock Exchange (HNX) reported that Vingroup completed the issuance of $525 million worth of 5-year bonds in the international market to contribute capital to the VinFast project. 

At the annual 2023 shareholders’ meeting, Masan Group submitted a plan to issue $500 million worth of international bonds. 

Meanwhile, some enterprises have successfully accessed foreign commercial loans. In late November 2022, Masan Group got a disbursement of a 5-year syndicated loan worth $600 million at the relatively low interest rate of 6.7 percent per annum. This was the biggest syndicated loan for private enterprises ever given in Vietnam.

Also in November 2022, VIBBank received disbursement for a $150 million loan from the International Finance Corporation (IFC). In June 2022, Techcombank got a loan worth $1 billion, while SeAbank borrowed $200 million from the US International Development Finance Corporation (DFC).

The solution that doesn’t fit all

Nguyen Tri Hieu, a respected finance expert, said that many enterprises think of raising funds in the international market if capital flow is stuck in the domestic market, but not all of them can do that. 

Hieu said this solution can only be implemented by a few enterprises which have a good reputation and healthy audited financial reports.

In principle, lenders arrange loans based on borrowers’ crediting ratings. Meanwhile, the ratings of most enterprises are not higher than the national rating, which is now below the investment grade. This is an obstacle for enterprises that want to issue international bonds. 

Recent negative incidents in the financial and real estate markets have weakened enterprises’ financial health. In May 2023, after a lot of delays, the shareholders’ meeting of Dat Xanh Group approved the cancellation of the plan on issuing $300 million worth of convertible bonds in the international market, though all the preparations for the issuance was completed.

According to Nguyen Ba Khuong from VNDirect Securities, only a few large corporations, such as Vingroup, HDBank, Nova Land and BIM Group, succeed in issuing international bonds.

To be eligible to issue international bonds, Vietnamese issuers have to satisfy many regulations set by foreign markets, including credit ratings. The complicated procedures for listing may prolong the issuance process, thereby increasing the issuance cost.

Regarding bond interest rates, Hieu believes that it is not the right time to issue bonds. The interest rates in the international market are lower than in Vietnam, but if counting all kinds of expenses, plus exchange rate risks, total costs won’t be low.

According to Tran Thi Khanh Hien from MB Securities, the total capital cost would be around 9-9.5 percent.

Manh Ha