Vietnam loosens bond regulations

By Phuong Dong   March 5, 2023 | 07:33 pm PT
Vietnam loosens bond regulations
Cash transaction is seen at a bank in Hanoi. Photo by VnExpress/Giang Huy
A new decree on corporate bonds allows issuers to extend payments by a maximum two years if holders agree. If not, issuers need to negotiate to ensure their rights are fulfilled or go back to the original payment plan.

The decree, effective Sunday, drops a previous term which blocked issuers from changing the terms of an issued bond.

The new decree also allows issuers to negotiate with bond holders to pay with other assets if they fail to redeem the bonds on time. Again, this must be approved by holders.

In addition, the government has removed a requirement for individual bond investors to have a stock portfolio of at least VND2 billion ($84,370) for at least 180 days.

It also dropped a previous regulation that forces bond issuers to distribute their bonds within 30 days of announcing the issuance. This change allows issuers to have more time to look for potential investors.

The policy changes were made after many companies began to rely on bonds to mobilize cash in recent years and many face large payback pressure this year.

In 2020 businesses issued VND462 trillion worth of bonds, and in 2021 VND658 trillion, according to the Vietnam Bond Market Association (VBMA).

But high-profile arrests related to bond issuance last year have discouraged companies from relying on this instrument.

Last year, the value of corporate bond issuance dropped 61% to VND255 trillion. In January this year only one issuance was successfully carried out with a value of VND110 billion.

Companies are facing large payment pressures this year as many bonds are set to mature in the second and third quarters.

Brokerage VNDirect estimates that the payment amount is set to reach VND273 trillion this year.

Many companies, especially property developers, have been negotiating with holders to extend payment or exchange the bonds for other assets, while holders are selling bonds for cash with a 14-17% discount.

go to top