kieudiemvje
15-07-2010, 05:36 PM
Enterprises are enthusiastically issuing convertible bonds to raise medium- and long-term capital.
About 17 listed firms have already issued or planning to issue convertible bonds this year, most through private offerings or to strategic or institutional investors.
Convertible bond issues so far this year through June have totalled about VND10 trillion (US$526.3 million) with an average term of two years and a coupon of 8-10 per cent per year, according to Au Viet Securities Company.
Dang Lan Huong, Head of analysis for Au Viet, said that issuing convertible bonds was serving the needs for capital to finance business operations now when the last year’s subsidised interest loan programme has ended, driving up the costs of borrowing at commercial banks.
The issuers were able to borrow at much lower interest rates using bonds in lieu of bank loans, and the convertibility allowed the loans to be repaid in equity rather than cash, said Dinh Quang Hoan of Viet Capital Securities Co’s corporate finance department.
Strategic and institutional investors – the leading buyers of convertible bonds – were, in fact, generally more interested in increasing their stakes in a company than in cashing in the bonds, Hoan said.
“Meanwhile, these instruments can protect bondholders from high risk due to the market downturns,” said Huong, noting that bondholders were guaranteed interest payments and would be able to convert the bonds into shares when market conditions were better.
Convertible bonds also avoided the problems of dilution which arise with offerings of additional shares as a means to raise capital, she said.
Issuers have began ensuring against dilution of existing shares by adjusting converted value to the issue price, or pledging no more increases in charter capital before the bond matures, Hoan said.
“This makes convertible notes even more attractive on the market,” he added.
LIST OF ISSUERS OF CONVERTIBLE NOTES
(In the first half 2010)
Name of issuers
Value of issuance (billion dong)
Face value (thousand dong)
Coupon rate (per annum)
Bond term
HCM City Infrastructure Investment Co (CII)
US$20 – 25 million
100
4%
5yr
Viet Nam Mechanisation Electrification & Construction Co (MCG)
459
1,000
12%
3yr
Saigon Securities Inc (SSI)
2,000
100
4%
1yr
Vinafco Corporation (VFC)
150
1,000
N/A
1yr
Transforwarding and Warehousing Corporation (TMS)
100
100
8%
2yr
Low Current-Telecom Company (LTC)
30
1,000
15%
18 mth
Tasco Company (HUT)
200
100
8%
1yr
Alphanam Company (ALP)
100
1,000
negotiable
3yr
Licogi 16 Company (LCG)
100
100
5%
1yr
Nam Mu Hydropower Company (HJS)
200
1,000
12%
2yr
Vien Lien Company (UNI)
50
1,000
10%
1yr
Housevietnam Company (NVN)
40
1,000
4%
1yr
Vietnam Bank for Industry and Trade (CTG)
3,000
100
floating
2yr
Sai Gon-Ha Noi Commercial Bank (SHB)
1,500
1,000
10.48%
1yr
Refrigeration Electrical Engineering Corporation (REE)
810
1,000
8%
13mth
Thu Duc Housing Development Corporation (TDH)
600
100
7%
3yr
(Source: Au Viet Securities)
About 17 listed firms have already issued or planning to issue convertible bonds this year, most through private offerings or to strategic or institutional investors.
Convertible bond issues so far this year through June have totalled about VND10 trillion (US$526.3 million) with an average term of two years and a coupon of 8-10 per cent per year, according to Au Viet Securities Company.
Dang Lan Huong, Head of analysis for Au Viet, said that issuing convertible bonds was serving the needs for capital to finance business operations now when the last year’s subsidised interest loan programme has ended, driving up the costs of borrowing at commercial banks.
The issuers were able to borrow at much lower interest rates using bonds in lieu of bank loans, and the convertibility allowed the loans to be repaid in equity rather than cash, said Dinh Quang Hoan of Viet Capital Securities Co’s corporate finance department.
Strategic and institutional investors – the leading buyers of convertible bonds – were, in fact, generally more interested in increasing their stakes in a company than in cashing in the bonds, Hoan said.
“Meanwhile, these instruments can protect bondholders from high risk due to the market downturns,” said Huong, noting that bondholders were guaranteed interest payments and would be able to convert the bonds into shares when market conditions were better.
Convertible bonds also avoided the problems of dilution which arise with offerings of additional shares as a means to raise capital, she said.
Issuers have began ensuring against dilution of existing shares by adjusting converted value to the issue price, or pledging no more increases in charter capital before the bond matures, Hoan said.
“This makes convertible notes even more attractive on the market,” he added.
LIST OF ISSUERS OF CONVERTIBLE NOTES
(In the first half 2010)
Name of issuers
Value of issuance (billion dong)
Face value (thousand dong)
Coupon rate (per annum)
Bond term
HCM City Infrastructure Investment Co (CII)
US$20 – 25 million
100
4%
5yr
Viet Nam Mechanisation Electrification & Construction Co (MCG)
459
1,000
12%
3yr
Saigon Securities Inc (SSI)
2,000
100
4%
1yr
Vinafco Corporation (VFC)
150
1,000
N/A
1yr
Transforwarding and Warehousing Corporation (TMS)
100
100
8%
2yr
Low Current-Telecom Company (LTC)
30
1,000
15%
18 mth
Tasco Company (HUT)
200
100
8%
1yr
Alphanam Company (ALP)
100
1,000
negotiable
3yr
Licogi 16 Company (LCG)
100
100
5%
1yr
Nam Mu Hydropower Company (HJS)
200
1,000
12%
2yr
Vien Lien Company (UNI)
50
1,000
10%
1yr
Housevietnam Company (NVN)
40
1,000
4%
1yr
Vietnam Bank for Industry and Trade (CTG)
3,000
100
floating
2yr
Sai Gon-Ha Noi Commercial Bank (SHB)
1,500
1,000
10.48%
1yr
Refrigeration Electrical Engineering Corporation (REE)
810
1,000
8%
13mth
Thu Duc Housing Development Corporation (TDH)
600
100
7%
3yr
(Source: Au Viet Securities)