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More and more businesses seeking capital by issuing bonds
Since it is very difficult now to access bank loans, a lot of listed companies are trying to seek capital by issuing bonds and convertible bonds.
The corporate bond market has become more bustling since the beginning of the second quarter of the year with tens of businesses having issued bonds to mobilize capital.
Issuing bonds – the lifesaver for businesses
Most big corporations decided to issue bonds with floating interest rates (Bonds’ interest rates are not fixed, and they will go up and down in accordance with the market interest rates) because they want to lift investors’ worries about high inflation and possible market interest rate increases. With this issuance method, the Song Da Corporation has successfully issued 1,500 billion dong worth of bonds, Electricity of Vietnam 2,000 trillion dong and Vietinbank 3,000 billion dong.
Private companies also decided to issue bonds. Vincom Group has issued 1,000 billion dong worth of bonds at the interest rate of 16 percent for the first year and floating interest rates for the next years. Meanwhile, Hoa Phat Group has issued 800 billion dong worth of three-year bonds at the interest rate of 14.5 percent for the first year and floating interest rates for the next years. Hoa Phat plans to use mobilized capital to develop real estate projects in Hanoi and increase the working capital.
Commercial banks and insurance companies prove to be the institutions that most favor corporate bonds because when purchasing bonds, they can enjoy relatively high interest rates.
However, not every enterprise can issue bonds, because the bond issuance still depends on the business operation scale, prestige and bank guarantees.
According to Dam Bich Thuy, General Director of ANZ Vietnam, it is a growing tendency for businesses in recent years to issue bonds, as businesses have been facing difficulties in seeking capital from other channels, including borrowing loans from banks or getting capital from shareholders.
Na Ri Mineral Corporation said in the first six months of the year, the finance expenditures were triple that of the same period of the last year, which explained why the corporation decided to issue convertible bonds (The bonds will be converted into stocks after a certain time) at the interest rate of 8 percent.
It is estimated that some 20 billion dong have been mobilized through bond issuance since the beginning of the year.
Meanwhile, Hoang Anh Gia Lai Group is planning to issue 1,100 billion worth of convertible bonds to the only buyer - Temasek investment fund. Analysts say investments funds rarely seek to purchase convertible bonds unless the funds are the shareholders of companies already.
Like many big corporations, smaller companies also try to issue bonds, but with smaller amount. UNI, for example, has issued 50 billion dong worth of bonds, ALP 100 billion dong, TMS 100 billion dong, VFC 150 billion dong and HUT 200 billion dong. Most of the bonds will mature after two years and have the interest rates of 8 to 10 percent per annum.
Is it profitable to buy bonds?
Whether to buy corporate bonds is the question many investors have raised for themselves. Many existing shareholders do not want to buy convertible bonds because they fear the price will go down later when the bonds become stocks, thus leading to the “stock dilution” phenomenon. Meanwhile, many others have been attracted by the high conversion ratio. For example, SHB Bank has issued 1,500 billion dong worth of one-year bonds at the interest rate of 10.48 percent per annum. After 12 months, the bonds will be converted into stocks with the ratio of 1:10, which means that investors will get 10 stocks for every one bond they hold.
vietnamnet, SGTT
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