VietNamNet Bridge – The government has not yet made any decisions to help Vietnam National Shipping Lines (Vinalines) find a way out of its massive debt obligation. Meanwhile, creditors have chosen different ways to deal with the shipping firm.

Domestic bank brings Vinalines to court

Since the day he took office as General Director of Vinalines two months ago, Le Anh Son has spent most of his time on the debt issue, under strong pressure by creditors.

Most recently, the Bank for Investment and Development of Vietnam (BIDV) has sued Vinalines in Hanoi People’s Court to demand the company’s repayment of VND236 billion. The decision to litigate was arrived at after Son failed in his attempts to negotiate with the bank on ways to restructure the debts.

When established, Vinalines had VND1.946 trillion worth of chartered capital. The shipping company was once the great pride of Vietnam, the first enterprise to cooperate with foreign businesses, and one which achieved great success with the establishment of joint ventures, equitization and share listing.

But the glory days of Vinalines ended in 2008, when the sea shipping industry began succumbing to the economic crisis. The Vinalines of today is a far different creature from the Vinalines of the past.

The legal system has, in fact, sentenced two former leaders of Vinalines to death for their economic crimes . And while the company is burdened with the huge debt of VND11 trillion, its business is stagnant.

Son said Vinalines has asked commercial banks to free it from 60-70 percent of its debt obligations. The suggestion infuriated the creditors. Nevertheless, Son is persisting in trying to persuade them that this is the best way.

“We have no other choice. The creditors should understand that if Vinalines can survive, they will still have opportunities to collect the debts. If not, both the creditors and Vinalines will suffer,” Son said.

Vinalines now still earns money with its logistics and port services. However, the earnings are modest due to the company’s heavy losses from shipping services, losses which have been increasing continuously over the last three years.

In 2011, the company took a loss of VND1.3 trillion. That figure rose to VND3.1 trillion in 2013. If Vinalines cannot complete its debt restructuring by the end of 2014, it expects to incur a the loss of VND2.3 trillion this year.

Foreign banks agree to sit for negotiations

According to Son, IFC, an arm of the World Bank, and four foreign commercial banks, which works out to half of the foreign creditors of Vinalines, have agreed to freeze the principal on the company’s outstanding debt and not to ask for interest on the loans for four years from 2013 to 2016.

“Foreign banks follow a transparent procedure to deal with debts. They accept losses to settle problems,” Son said. “If no compromise is made, the huge debt will still exist and grow like a cancerous tumor”.

VietinBank is the only domestic bank which has agreed to convert Vinalines’ debt into equity in the shipping firm. As such, VietinBank will become a shareholder of Vinalines holding and its subsidiaries after the equitization process.

Though BIDV has so far refused Vinalines’ proposal to forgive a portion of its debts, Son still hopes the bank will reconsider.

“Only by accepting our proposal, will it be able to claim its money back. If it still takes legal proceedings against Vinalines, neither Vinalines nor BIDV will have anything to gain,” he said.

DNSG/VNN