Monday, August 20, 2007

Investors salivate as overseas bond issue draws near

HA NOI — Foreign investors are expressing enthusiasm for an upcoming US$1 billion Government bond issue by Viet Nam to be carried out on the overseas market next month, under a plan ratified by the Prime Minister Nguyen Tan Dung in June.

"This bond issuance is indeed attractive and I know that demand from offshore investors is very high," said a senior foreign bank executive, who requested anonymity in a phone interview yesterday. "Actually, we are eager to buy them. The success of the Government bond issue in 2005 was very impressive."

The bonds will have 15- or 20-year maturities and includes Government debentures and Government-backed corporate bonds. The issues will be carried out and underwritten with the co-operation of Citibank and Deutsche Bank.

"The 2007 issue is expected to go smoothly as we have already learnt very precious experience from the first successful issue in October 2005, when we raised $750 million on the international bond market, which helped set a benchmark for the country’s creditworthiness," said Nguyen Thanh Do, director of the Department of External Finance under the ministry.

"The capital raised will go toward financing several major projects, including the $2.5 billion Dung Quat Oil Refinery, the Secaman Hydroelectric Project No 3 and the purchase of new vessels for the Viet Nam National Shipping Lines Corporation [Vinalines]," Do added.

The latest bond issue plan is on top of an already hefty list of coupons that State-owned enterprises will list over the next few years.

Electricity of Viet Nam (EVN) plans to issue $300-500 million worth of debentures on foreign exchanges in 2008, said EVN deputy general director Dinh Quang Tri, while the Vinashin Group intends to auction $1 billion in bonds on overseas markets.

"The State and the ministry have encouraged large and prestigious enterprises to issue international bonds following proper regulations," says Pham Phan Dung, director of the Ministry of Finance’s Banking and Financial Institutions Department.

"In the future, the country’s demand for investment capital may touch $140 billion, 30 per cent of which may come from foreign sources. Therefore, capital mobilisation through the bond market is very important as an alternative to foreign direct investment and related forms," said Dung.

"However, foreign investors want their capital to return profits, so they want to be sure that enterprises are capable of using their capital productively. Hence, I think businesses should continually improve comprehensive capacity by applying modern technology and suitable means of production to meet the demands of domestic and overseas markets."

Moody’s sovereign rating for Viet Nam is Ba3, while S&P’s is BB+ and Fitch’s is BB. — VNS