VietNamNet Bridge – A lot of enterprises, which were over head and ears in debts, have unexpectedly announced they have escaped from the debt burden worth trillions of dong.

Struggling to survive

The enterprises have been struggling hard to survive and “beautify” the balance sheet by negotiating with the creditors on the debt payment delay, rescheduling and debt restructuring.

On October 29, 2013, Nam Bay Bay Investment Company (NBB) unexpectedly announced that it has cleared the due debts by restructuring bonds and loans.

The big guy in the real estate sector, which has been “maltreated” by the gloomy real estate market, said VIB Bank has agreed to extend the VND350 billion worth of bonds, which came matured in 2012 and 2013, to 2014 and 2016.

The payment of the other debts in loans and bonds at EVN Finance Company, Bao Viet Securities Company and BIDV Bank would also be extended by 1-5 years.

As such, NBB has successfully restructured VND1 trillion worth of debts, which account for 80 percent of the borrowing of the company. Its finance report showed that by June 30, NBB’s total debt value had reached VND1.2 trillion.

Prior to that, NBB once asked for one-year payment delay for corporate bonds. The initial bond interest rate was 11.5 percent and then rose to 18 percent per annum as NBB deferred the debt payment.

Dang Thanh Tam, who was listed as the richest stock millionaire in 2007, has also been trying to restructure the debts.

He has asked for the delay in the payment of the VND1.7 trillion worth of bonds issued by the subsidiaries in which Tam holds controlling stakes until the end of 2014.

Hoang Anh Gia Lai Group, the business of Doan Nguyen Duc, one of the most influential businessmen in Vietnam, has set up a subsidiary, An Phu, in charge of dealing with bad debts and helping the holding company “make up” the financial reports.

An Phu borrows money from the holding company to make payment for the purchases of the subsidiaries and unprofitable projects. After that, it develops the projects for reselling, or sells the projects immediately to collect money for the holding company.

An Phu has also been assigned the task of selling a part of the group’s assets, which includes six hydropower projects. The projects have brought VND2.099 trillion, thus helping reduce the debts to VND1.87 trillion.

New debts are heaped on the old ones

Le Dang Doanh, former Head of the Central Institute for Economic Management (CIEM), a well-known economist, said agreeing to extend the debt payment means giving debtors one more opportunity to struggle to survive and pay debts.

However, he has warned that the method may do more harm than good, if it is implemented in a large scale. The enterprises which cannot pay due debts are believed to be at the point of death. Therefore, it is of no use to give them “a kiss of life.” It would be even more dangerous, if the new debts are heaped on the old ones.

Nguyen Hoang Minh, Deputy Director of the HCM City Branch of the State Bank of Vietnam, has recently announced that those enterprises, which have unpaid debts, but have feasible business plans, will still be able to get new loans.

Minh said the policy aims to help enterprises escape the current temporary difficulties and help banks push up lending. However, he admitted that this would be risky for banks if clients cannot pay both new and old debts.

Dat Viet