The maker of cotton products ``may go bankrupt within a month'' if the government, via Gia Dinh Textile & Garment Co., doesn't allow the company to issue more shares, said General Director Ta Xuan Tho in Ho Chi Minh City today. The state-backed textile company has a 30% stake in Bach Tuyet.
``Without money raised from issuing shares, we will not be able to pay 17 billion dong ($1 million) in banks' interest and overdue loans at the end of this month,'' Tho said.
The State Bank of Viet Nam in June increased its benchmark interest rate to 14%, the highest in Asia, to slow inflation, and allowed banks to charge a 21% lending rate.
Gia Dinh, managing state investment in about 14 joint-stock companies in Ho Chi Minh City, rejected the capital-raising plan on concerns the value of existing shares would be diluted.
``New shares will dilute the existing shares,'' Le Dong Trieu, Gia Dinh Textile's general director, said today. ``Bach Tuyet's management board should be replaced before they seek to issue more shares.''
More than 200 workers have stopped work since last week after funds to buy raw materials ran out, Tho told shareholders at an annual meeting today.
Trading Halt
The Ho Chi Minh City Stock Exchange, Vietnam's main bourse, halted Bach Tuyet's trading on July 11 after the company failed to submit the financial report for the first quarter.
The company posted losses of 6.8 billion dong last year and 8.5 billion dong in 2006, according to Bach Tuyet's 2007 financial report released today at the meeting.
Bach Tuyet had told shareholders last year its net profit was 2.3 billion dong in 2006 and recorded a pretax profit of 3.4 billion dong in 2007.
The Ho Chi Minh Stock Exchange is considering whether to resume trading Bach Tuyet's shares on July 16, according to Phan Vu Tram Huong, Ho Chi Minh Stock Exchange's deputy head of the listing office.
The company has 6.8 million outstanding shares with a market value of 60 billion dong. The shares have dropped more than 60 percent this year, and traded at 8,800 dong on July 10, according to data compiled by Bloomberg.
Bach Tuyet plans to meet with the Ho Chi Minh City People's Committee this week to discuss the possibility of persuading Gia Dinh Textile to change its mind, Tho said.
Some investors have expressed interest in the company's shares, according to Tho.
``We knew about Bach Tuyet's losses, but we believe the company still has much potential in hospital supplies and in the sanitary-pad market,'' Nguyen Thi Thu Thuy, managing director of Truc Anh Investment Co Ltd., said in Ho Chi Minh City.
Truc Anh Co., which also exports seafood, plans to finance 40% of Bach Tuyet's 600 billion-dong hospital project in Ho Chi Minh City, according to Thuy. Bach Tuyet received a license from the city authorities early this month to build a 200-bed hospital. (Bloomberg)
