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Dealt out
ANZ is in the center of attention as it is involved in a dispute with a local company.
ANZ (Vietnam) last month was accused of failing to implement commitments it made with the Interfood Shareholding Company (IFS) regarding advising on and underwriting a bonds issue. Interfood notified the Ho Chi Minh Stock Exchange (HoSE) about the matter in Document No 476/CV-2010. Prior to that, it ceased all transactions on HoSE from August, 17, under Decision 174/QD-SGDHCM, having violated Article 20 of the Listed Securities Regulations by recording major losses in 2008 and 2009.
According to its financial report last year, IFS after-tax losses totalled VND27.73 billion ($1.4 million) in 2009, after losing VND262.5 billion ($13.6 million) in 2008. In its 2008 annual report, IFS pointed to impacts on its costs and profits, including the broken down deal with ANZ.
In 2008 it expanded its investment in the north by establishing the Northern Interfood Shareholding Company in Bac Ninh province. Investment capital and chartered capital were to be VND583.2 billion ($36 million) and VND178.2 billion ($11 million), respectively. To launch the project, IFS advanced $10 million to purchase equipment and lease land. The company planned to fund the investment by issuing bonds guaranteed by the ANZ Hanoi branch, under an agreement signed between the two in December 2007. To support the company’s project while waiting for the bonds issue, ANZ also signed other agreements with IFS, including a bridging loan of $18 million. IFS then disbursed $4 million in capital in March 2008.
According to IFS, ANZ then chose not to proceed with the bonds issue and cancelled the bridging loan because the global financial crisis in the second quarter of 2008 influenced finance and credit activities in Vietnam. So IFS had financial problems and were forced to cease the project and lost the money they had advanced, according to their 2008 annual report.
The matter is now before the Appellate Court of the Supreme People’s Court in Hanoi.
A representative from ANZ confirmed with VET that IFS has had a complaint against them for two years. But she challenged the reason why Interfood recorded major losses in 2008 and 2009. There were many other reasons behind its problems, which the company did not tell HoSE. “We have a decision in our favour from the court of first instance and are now looking forward to the final result from the Appellate Court,” she said. ANZ Hanoi branch is now in the process of completing legal procedures, so cannot say anything more.
According to one financial expert, an article in the agreement could have been changed and the story will have had a different result. The case should have been reviewed and the two agreements on the $18 million bridging loan and advising on and underwriting the bonds issue reconsidered. But the matter went to court. “Interfood claimed they lost because of the actions of ANZ, but I don’t think so,” he said. “For ANZ, an $18 million agreement is not a big deal.” But IFS’s project was put at risk.
As a former employee of the “Big Four” in Vietnam and with a number of years experience in Australia, he added that the case is certain to affect ANZ’s prestige because it has a name in the field of bond issues, last year issuing bonds for the joint stock Military Bank (MB) and the state-run Electricity of Vietnam (EVN). “Their reputation has been built up over a long period of time and has now been affected significantly,” he said.
ANZ was one of the first overseas commercial banks to have invested in local banks. It did so with the Ho Chi Minh City-headquartered Saigon Thuong Tin Bank (Sacombank), but was unsuccessful because it decided last year to divest some or all of its holding.
According to its 2006-2010 strategy, Sacombank planned to increase its chartered capital by 30.98 per cent by the end of the third quarter of 2009. This was to be achieved via the following: 76.7 million shares through a stock dividend (15 per cent), 76.7 million additional shares to shareholders and 5 million shares to employees. However, the ANZ representative - who was absent from Sacombank’s general shareholder meeting - rejected the scheme.
ANZ also owns 10 per cent of Saigon Securities Inc. (SSI) and recently purchased more. However, ANZ is planning to become an investment bank so it may adjust its strategy. With the disputes it’s had, some experts question what ANZ’s future strategy in Vietnam will be.
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