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Vietinbank seeks approval for $1b bond issue
Vietinbank (HoSE: CTG)'s executive board plans to raise up to US$1 billion in an overseas bond issue this year to finance projects and enhance capital for business, the bank has announced on its website.
The bond will have a maturity of five to 10 years. The Ha Noi-based bank is considering to offer the bond to Asian and European investor groups (Excluding investors in the US) or global investors.
The plan will need shareholders' approval at its annual meeting on April 4.
Vietinbank decided an overseas bond issue had the potential to provide a large term loan at competitive interest rates.
The lender has sold a 10 per cent stake to the International Finance Corporation (IFC), a financial arm of the World Bank, and plans to sell another 15 per cent stake to Canada's Bank of Nova Scotia.
Vietinbank – the third largest bank in Viet Nam by credit market share and fourth largest by stock market capitalisation – expects to double its charter capital over the next 10 years, from VND15.17 trillion ($722.38 million) to VND30 trillion ($1.43 billion).
After the default of debt-laden shipbuilder Vinashin, Viet Nam was downgraded by three international ratings agencies (Standard&Poor's, Fitch, and Moody's) last year, which is predicted to hinder overseas borrowings of Vietnamese enterprises.
The No 6 bulletin by the Ministry of Finance earlier this year showed that Viet Nam's sovereign debt rose to $29 billion, as of June 30, 2010, from $27.9 billion at the end of 2009 – equivalent to about 28 per cent of Viet Nam's GDP of $104 billion last year.
Of the amount, Government debt accounted for $25 billion, while borrowing by State-run companies and organisations was $4 billion.
The country is expected to repay $1.1 billion this year.
In the first quarter of last year, the Government and State-run companies and organisations paid $329 million in principal, interest rates and costs. In the whole of 2010 they paid some $1 billion in principal and interest.
If the country takes out no further foreign loans, Viet Nam's debt repayment will be $1.7 billion in principal and more than $250 million in interest up to 2016.
The ministry said the debt remained within a "safety threshold".
It was an appropriate level considering the country's development strategies and was eminently manageable, the ministry said. Viet Nam had punctually paid its debt since 1993.
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