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Troubled Vietnamese shipbuilder to be restructured for survival
Parts of the heavily-indebted Vinashin Economic Group will be transferred to PetroVietnam and Vinalines, also state companies, and the remainder restructured.
For months it’s been known that the state-owned shipbuilding corporation, Vinashin, has been hammered by the global financial crisis. Now, reports Tien Phong daily, Prime Minister Nguyen Tan Dung has instructed Vinashin to lose no time in assessing the responsibility of members of the management board and the executive board, leaders of subsidiaries, for allowing Vinashin to fall deeply into debt. The group owes creditors some tens of trillions of dong. [Ten trillion dong = $526 million]
To survive, explains Tien Phong, Vinashin must check, reduce and delay some projects, and in addition change its production and business strategy and improve corporate management, especially its financial administration.
The conglomerate will be divided into three parts by September 30. A rump group will be managed by Vinashin. Other parts will be transferred to the Vietnam Oil and Gas Group (PetroVietnam) and the Vietnam Shipping Lines Corporation (Vinalines). All three corporations are state-owned enterprises.
PetroVietnam will take charge of the Lai Vu Shipbuilding Complex (Hai Duong), Nghi Son Shipbuilding IZ (Thanh Hoa), Nhon Trach Specialized Shipbuilding and Equipment Manufacturing Plant (Dong Nai), the Dung Quat Shipyard (Quang Ngai), Soai Rap Shipbuilding Industrial Zone (Tien Giang), Vinashin’s share in the Hoang Anh Shipbuilding JS Company (Nam Dinh) and other Vinashin investments.
Vinalines will take over the Hai Ha Seaport IZ (Quang Ninh), Dinh Vu Port (Hai Phong), Hau Giang IZ and Shipyard (Hau Giang), Nam Can Shipyard and Port (Ca Mau), the East Sea Marine Transport Company, the Vien Duong Transport Company, and Vinashin’s share in other marine transport companies.
A casualty of the global recession
Vinashin was established in May 2006 through the restructuring of the Vietnam Shipbuilding Industry Corporation. State-owned, it has operated as a holding company with many subsidiaries.
After signing many shipbuilding contracts with foreign partners, Vinashin had emerged as one of the world’s biggest shipbuilders and taken Vietnam to 5th among shipbuilding countries. But behind that showy victory, debt grew. By December 31, 2007, they totaled over 70 trillion dong (around $4.7 billion), including nearly 44 trillion in long term loans. Even then, with debt burden equal to 91 percent of Vinashin’s assets, its solvency was precarious.
In 2007, Vinashin had 150 subsidiaries, 71,000 workers and its output valued at 27.5 trillion dong.
In the eighteen months after it was established, Vinashin added 46 subsidiaries - 37 newly established firms and nine others handed over by other groups.
Tien Phong asks how Vinashin was able to borrow such a huge volume of capital, then answers its question: a Government decision dated September 1, 2005, authorized Vinashin to re-borrow $750 million of capital mobilized through international bonds to upgrade and modernize the nation’s shipbuilding industry.
Ten-year bonds were issued in November 2005 with an annual interest rate of 6.875 percent. Interest is paid every six months. To raise this capital, Vinashin paid underwriters a fee of 168 billion dong. After the capital was in hand, the group appointed Vinashin Finance Company to manage and lend this capital to its subsidiaries.
Vinashin also borrowed $600 million from 15 foreign banks and two foreign investment funds in June 2007, paying fees of $8 million to obtain this loan. These funds were also confided to Vinashin Finance Company. Further, Vinashin issued local bonds six times in 2006-2007, raising 8.3 trillion dong. Last, the parent company took out 805 billion dong in ordinary loans while subsidiaries borrowed nearly 13 trillion.
Accordingly, long-term debt rose to 43.7 trillion dong, nearly $3 billion. In addition, its short-term debts totalled at least 27 trillion dong. Vinashin invested this huge sum in shipbuilding projects and upgrading the infrastructure at its shipyards in anticipation of steadily growing business. When the global financial crisis then hit, toward the end of 2008, and shipping companies delayed or cancelled many orders, Vinashin was immediately in a precarious position.
vietnamnet
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