Vietnams' corporate bonds attractive for foreign investors

VNStockNews.com - Corporate bond market is showing the best performance in the 2-3 years especially when Vincom's bonds on the international market were sold out s in nearly 12 hours after being issued.

Last week early, Vincom Joint Stock Co reported raising $100 million from international convertible bonds and listing these bonds on Singaporean Stock Exchange, becoming the first Vietnamese firm issuing and listing bonds on foreign bourse.

According to Le Khac Hiep, chair of Vincom director board, within about 12 hours, the bidding for buying Vincom bonds was higher two times than the offering volume with the participation of over 30 foreign investors. Although Credit Suisse Singapore as the sole issuing-guarantee organisation cum consultancy agent proposed Vincom to increase the offering volume, local firm was determined to retain the initial decision (issuing only $150 million worth of convertible bonds) in order to ensure the interests of investors.

The bonds in US dollar have a term of five years without secured assets and the annual coupon rate of 6 percent. Payment will be conducted every six months. The bonds will be converted into Vincom's ordinary shares at the closing price of the issue day of 108,000 dong/share.

Also, Kinh Bac Urban Development JS Corp (KBC) also launched three bond issue phases worth total 1.2 trillion dong. These bonds were out of stock immediately after being issued. As stated by Dang Thanh Tam, chair of KBC, the coupon rate for all above three issue phases stood at 12.5 percent a year after counting out all issue consulting cost, guarantee and risks.

Investors said the 12.5 percent pa rate of KBC was very attractive because the government's 2-year bonds carried 10-10.2 percent pa in the middle of 2009.

Since the start of this year, according to initial statistics, there have been over 13 corporate bond issues worth approximately 20 trillion dong, typically state enterprises of EVN Finance, Vinacomin and VinaSteel, or non-state firms like KBC, Hoang Anh Gia Lai, FPT, Techcombank, VIB Bank and Nhon Trach Investment JSC.

Meanwhile, compared with the plan of offering 55 trillion dong of G-bonds within this year, Hanoi Stock Exchange (HNX) in first nine months raised about 2.3 trillion dong and $237 million from G-bonds.

Capital business director of a bank assessed, as compared with 2007, the success of corporate bonds in 2009 is lower but more impressive than 2008. However, the fact is that most investors were not attracted by corporate bond issues because corporate transparency is not high yet and the liquidity risks remain high. These are also major reasons explaining that's why most corporate bond buyers are partners having the close business relation with bond issuers.

The prominent thing is that Vincom's bond issue does not require secured assets. Le Khac Hiep revealed, the convertible bonds will promise bigger profits when investors can buy shares at preferential price in future. Share buying option is the added value of the kind of bonds whereby Vincom's convertible bonds are very attractive as for investors. Furthermore, as issuing convertible bonds, Vincom can reduce costs for bank loan rates.
Coupon rate of bonds will be lower than ordinary loan rates.

Meanwhile, the attractiveness of KBC bonds is that investors can mortgage or re-sell KBC bonds to Vietinbank (the underwriter of KBC bond issue). In case KBC loses payment capacity, Vietinbank commits to pay interests to investors.

To reach a higher liquidity, Vincombank brought its bonds to Singaporean Stock Exchange as well as KBC plans to list bonds on Hanoi Stock Exchange (HNX) in the upcoming time.

In addition, the support of well known finance organisations back enterprises will ensure the corporate image, such as HSBC and Standard Chartered arranged the bond issue of Techcombank, ANZ managed the bondholder book for FPT. Hiep admitted that Vincom selecting Credit Suisse as the underwriter was the right decision and ensured the success of this convertible bonds.