Corporate bonds attract foreign investors
2009 has been a really good year for bond offers by Vietnamese companies. Both Vietnamese and foreign investors have snapped them up.
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Vietnamese corporate bonds will be listed on Singaporean stock market |
Vincom Group earlier last week sold a $100 million issue of corporate bonds and listed the bonds on the Singapore Stock Exchange, becoming the first Vietnamese company to issue and list bonds on the international market.
According to Vincom Chairman Le Khac Hiep, the bond isssue was oversubscribed by 200 percent within 12 hours. Over 30 investors registered to purchase bonds.
Vincom’s advisor, Credit Suisse (Singapore), had proposed to increase the size of the issue, but, Hiep said, Vincom decided to stick with the initial plan in order to ensure benefit for its investors and guard against undue ‘dilution’ of shares.
The five year convertible bonds are dollar-denominated and carry an interest rate of six percent per annum. The bonds can be converted into Vincom shares.
KBC, Kinh Bac Urban Development JSC, has sold three issues of corporate bonds worth 1.2 trillion dong (about $66 million) in total. The bonds were selling so well that one issue sold out just three hours after it was announced by the corporation. The average interest rate of the KBC bonds is 12.5 percent on average. Analysts call this very good for KBC, because investors have ‘demanded’ a high 10 to10.2 percent per annum yield from Government bonds which were issued in mid year.
Thoi bao Kinh te (TBKT) reports that 13 corporate bond issues have been carried out so far this year, valued in total at approximately 20 trillion dong (circa $1.1 billion). Among the bond issuers were three state-owned groups, Electricity of Vietnam (EVN), the Vietnam Coal and Mineral Industries Group (Vinacomin) and VinaSteel. Also notable were non-state groups including lumber and real estate giant Hoang Anh Gia Lai, IT powerhouse FPT (the Corporation for Financing and Promoting Technology) and Techcombank, in addition to KBC.
A banker who follows the bond market closely told TBKT that the corporate bond market hasn’t recovered to 2007 levels but it has far outstripped 2008, when only two companies issued bonds.
Meanwhile, the Government has found it difficult to find buyers for its bonds.
By mid-September, it had sold only 6,330 billion dong worth of bonds (2,300 billion dong and $237 million), well below the planned volume of 55 trillion dong.
Added value
Recent results notwithstanding, investors are still lukewarm toward Vietnamese corporate bonds for two reasons: low information transparency and liquidity risks. That’s why the majority of buyers are partners of the issuers or have some other close relationship.
The key to Vincom’s success was that it issued convertible bonds, which can be traded in for shares at the investor’s option. Vincom Chairman Hiep said that the convertibles promise to bring investors bigger profit in the future because they will be able to purchase shares at preferential prices
Meanwhile, Chairman Dang Thanh Tam of KBC said that his company had succeeded in easing investor worries of investors about liquidity. Because the KBC bonds are guaranteed by Vietinbank, investors can sell the bonds to Vietinbank or mortgage them at the bank as security for loans.
Backing by famous financial institutions is another factor that helps issues succeed. HSBC and Standard Chartered Bank both were involved in Techcombank’s issue, while ANZ supported FPT.
Hiep called Credit Suisse a good choice for Vincom.
Source:vietnamnet.vn
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