Few takers for Vietnam’s international corporate bonds

In the first eight months of this year, companies registered 5 separate international bond issues, but only VPBank has been able to successfully issue $300 million worth of 3-year term bonds to Asian and European investors this July, according to the Hanoi Stock Exchange (HNX).

Vietnamese corporate bonds have always found it hard to attract foreign investors, or have had to issue them at high interest rates because of Vietnam’s low credit rating, economist Nguyen Tri Hieu told VnExpress International.

Currently, global credit ratings firms Fitch and Standards & Poors (S&P) have given Vietnam a BB rating, and Moody’s Ba3 rating, which puts Vietnamese bonds in the non-investment grade. This means that the probability that the issuer will repay the issued debt is deemed speculative.

Because the general rule is that companies cannot have a rating higher than the credit rating of the country they operate in, even if the company is a better credit risk than its home country, Vietnamese firms have had a hard time pushing through their international bond issues, Hieu said.

"There are also many complications in issuing corporate bonds. Although issuers normally have identified demand or gone into purchase agreements with international investors prior to the bond issue itself, it has to find other parties who are willing to share the risks of the bond issue," he noted.

"This includes consultancies or banks willing to underwrite bonds if some remain unsold after the issue, or financial institutions willing to guarantee payment of interest or principal in case issuers fail to do so, given Vietnam’s current credit rating."

However, economist Can Van Luc said in July that Vietnam has conditions much more favorable this year for issuing international bonds compared to previous years, with a stable macro-economy, strong growth of 7.08 percent last year, and the fact that S&P raised Vietnam’s credit rating from BB- to BB in April.

Vietnamese banks have been looking to the international bond markets to raise capital to comply with credit safety regulations and meet rising credit demand.

In August, SHB planned to issue $500 million of international bonds on the Singapore Stock Exchange, aiming to raise capital and alleviate the dependence on domestic sources of foreign currency.

In June, TPBank said it plans to issue $200 million of international bonds, while VPBank announced plans to  issue $1 billion worth of bonds in the form of 3-5 year Euro Medium Term Notes over several rounds.

In the first 8 months of 2019, HNX recorded 534 domestic bond issues with a total registered capital of over VND239.23 billion ($10.31 billion), of which VND157.9 trillion ($6.8 billion) were actually purchased (66 percent). The bonds offered had an average term of 4.49 years.