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A banker ready to buy Vinashin’s debts
“We are ready to buy back all the debts of Vinashin at the price which is equal to 35 percent of the face value, or 210 million dollars (the original price is 600 million dollars), and we will pay money at once,” the chair of a big bank in Vietnam has stated.
Not only the big bank but some finance institutions and foreign investment funds have also expressed their intention to buy back Vinashin’s debts. The only thing that needs to be discussed now is the prices of the debts.
The Vinashin’s debt prices have been fluctuating heavily in the last 13 months on the international market. In September 2010, Vinashin bonds were offered to sell and buy at the prices equal to 60 percent of the face value.
The price then jumped to 70 percent of the face value in October, when a foreign investment fund in HCM City grabbed the opportunity and sold 50 million dollars worth of bonds. After that, the price has been decreasing and has been staying firmly at the level equal to 50 percent of the face value, while Vinashin and the creditors negotiate for a feasible solution to the shipbuilding group.
In early November 2011, Dutch Elliott Vin, a venture fund and one of the foreign creditors of Vinashin, filed for sue Vinashin and its 21 subsidiary to the London Court of Superior Jurisdiction to ask for debt payment. The Vinashin debt price then dropped dramatically to the level which was just equal to 40 percent of the face value.
Vinashin making efforts to pay debts
In December 2010, Vinashin had to pay 60 million dollars out of the total debt of 600 million dollar it borrowed from some foreign banks. After that, the shipbuilding group has to pay another 60 million dollars every six months, or 10 percent of the value of the debts. As such, if Vinashin follows the plan, it will pay 180 million dollars by this December.
Since creditors felt anxious when Vinashin did not pay debts for the first stage on schedule. Credit Suisse, the biggest creditor then continuously asked for arranging the meetings for discussion. In April 2011, a committee on Vinashin debt was established, comprising of four creditors, namely Credit Suisse, Depfa Bank, Maybank and Elliott Advisors. Standard Chartered Bank was once a member of the committee, but it withdrew from the committee a little later.
However, the new managers of Vinashin have been well aware the responsibility of paying debts, well understanding that the tardiness in debt payment may badly affect the national prestige.
Therefore, after some domestic banks have turned the green light on, Vinashin has officially suggested two solutions: either the group pays the debts immediately at 35 percent of the face value, or the old credit contracts will be converted into new ones with new conditions.
Meanwhile, creditors have put forward a solution under which new credit contracts will be set up with the term of 15 years, and the interest rate will be calculated by the Libor interest rate plus 150 percentage points. Meanwhile, the interest rate will increase by another 50 percentage points from the 11th to the 15th years.
35 percent of face value, why?
As such, banks are seeking to buy Vinashin’s debts at the price equal to 35 percent of the face value. Why 35 percent? One of the interested bankers said that 35 percent of the face value is really a reasonable price, because it is very likely that Vinashin would be able to pay the principal after 10 years.
Besides, when buying debts, banks will have to take insurance policies in order to avoid risks. And it is clear that the insurance premiums in this case would be very high.
“The low price will offset the high risks. In principle, when you want high profits, you have to accept high risks,” the banker said.
vietnamnet, saigontimes
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