Since the end of 2009, when the national economy began to show signs of recovery, many enterprises have been rushing to issue corporate bonds, which allow them to seek capital to implement their investment projects and expand the scope of their businesses.
On May 26, the Vietnam Construction and Import-Export Corporation (Vinaconex) announced the successful issuance of two trillion dong worth of corporate bonds. The bonds have the face value of one billion dong and the interest rate of 14 percent per annum for the first year. The interest rates of the upcoming years will be calculated by the average interest rates of four commercial banks (Agribank, BIDV, Vietinbank and Vietcombank) plus 3.5 percent. Vinaconex plans to use the sum of money raised from bond issuance to develop key investment projects and expand its operation scale.
Prior to that, on May 21, 2010, Cong Thanh Cement Joint Stock Company also announced the successful issuance of 700,000 corporate bonds with the total face value of one million dong. The money raised from the bond issuance will be used to develop the second production line of Cong Thanh cement factory. According to Cong Thanh, 5-year bonds have an interest rate of 15.5 percent, while 8-year bonds have an interest rate of 16 percent for the first year. The interest rates of the upcoming years will be calculated by the interest rate of Vietinbank plus 4-4.5 percent.
Many businesses, including the Hoang Anh Gia Lai and Vincom Groups, have decided to issue convertible bonds, as they have found out that convertible bonds would more attract investors, thanks to the high liquidity of the bonds
Most recently, on May 31, Que Huong Liberty Joint Stock Company registered to issue 1.19 million convertible bonds with the face value of 100,000 dong. When the bonds mature, they will automatically become shares. The expected bond issuance day will be on June 25, 2010, and the day when the bonds become shares will be December 26, 2012.
According to the company, the sum of money to be raised from the bond issuance, estimated at 325 billion dong, will be used to develop the Metropole hotel project.
Not only large corporations are looking for capital by issuing bonds, but also commercial banks as well. Vietinbank on May 26 decided to issue 2-year term bonds worth six trillion dong with the interest rate of 12.5 percent per annum. Prior to that, Techcombank, LienVietbank and ABBank also successfully carried out bond issues.
According to the deputy director of a bank, banks seek to issue bonds because this capital mobilization channel allows them to get medium and long-term capital, since they find it very difficult to mobilize this type of capital through deposits.
It is not difficult for banks and businesses to issue corporate bonds, because the issuers have all offered high interest rates for bonds – higher than 11.5 percent, which was considered as the ceiling deposit interest rate.
A lot of people who have idle money have chosen to purchase bonds because they find the interest rates attractive. However, this is still not a popular investment channel for some individuals, because the bonds all have high face value (One billion dong).
In fact, only big corporations and banks have dared to issue bonds. This is because, according to Phan Dung Khanh, Deputy Head of the Analysis Division of Kim Eng Securities Company, investors only purchase the bonds issued by prestigious companies that have strong reputations.