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Banks accept debt payment in stocks to ease bad debts
Unable to clear inventories to get money for debt payment, a lot of debtors have to pay in their shares.
In mid-June 2013, Everpia Vietnam (EVE), in its press release, informed that 3 million shares of the company were transferred to Tien Phong Bank.
At the same time, FPT Capital, an investment fund, announced it sold 11 percent of EVE shares, exactly the same volume of shares Tien Phong received. The coincidence then made people make a wild guess that there was a close relation between the two deals.
The two brothers Do Minh Phu and Do Anh Tu began their management at Tien Phong Bank in April 2012. Phu, the President, is also the owner of a gold trade company, famous for DOJI brand. Meanwhile, Tu, Vice President, is believed to have experiences in the consumer goods sector after the deal of selling 95 percent of Diana’s stakes to Japanese Unicharm.
People had every reason to raise questions about the deals. Tien Phong Bank only bought 11 percent of EVE stakes, while Tu has been well known with his principle: “don’t buy or buy up, don’t sell or sell out.” This means that Tu won’t accept a deal which only brings a limited percentage of stakes, unless he has special reasons.
When asked about the 11 percent stake deal, Tu simply said this was a special deal of Tien Phong Bank to handle with its assets.
Tien Phong Bank was found in the list of the banks subject to the compulsory restructuring process. Therefore, it was understandable that it needed to try every possible method to help ease the bad debts.
The head of the analysis division of an investment fund in HCM City, who asked to be anonymous, said it was highly possible that the transfer of 11 percent of EVE stakes was the payment for the loans the big shareholder once borrowed from Tien Phong Bank.
In fact, in an effort to clear bad debts, a lot of commercial banks had to accept shares instead of cash as the debt payment. The same method was applied in the case of the Saigon – Hanoi Bank’s which held 50 percent of Bianfishco’s stakes.
Thai Hoa Coffee Group, once owed VND100 billion to Maritime Bank. The two sides then reached an agreement on the debt restructuring, under which Thai Hoa sold 99 percent of the Dien Bien project to the bank for VND40 billion.
The company then also sold 51 percent of its coffee project in Laos to the bank. After the two deals, Thai Hoa successfully settled the debt incurred with Martime Bank.
Nguyen Van Duc, Deputy Chair of the HCM City Real Estate Association, noted that in recent years, commercial banks – the creditors – tend to buy enterprises’ assets at the prices just equal to 50 percent of the actual values. Banks also accept to buy mortgaged assets at low prices.
The method helps bring benefits to both sides. While enterprises can get some money to pay debts, banks can clear parts of their bad debts.
However, in most of the cases, the deals were not made public.
Truong Huu Hiep, Deputy Director of the Bank for Investment and Development of Vietnam, commented that this is the way most feasible for the both sides, and that creditors and debtors only need the jurisdictions of the courts when they cannot find a common voice.
vietnamnet
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