Tuesday, January 15, 2008

Vietnam needs ‘markets to stay stable’ for overseas bond sale

Dung Quat Oil Refinery under construction in central Vietnam will use part of the proceeds from this quarter’s bond issues by the government
The government will sell a US$1 billion foreign currency-denominated bond as soon as the global markets improve, according to the finance minister.

“We are closely watching the movement of international financial markets and need the markets to just be stable for a couple of weeks to sell the bond,’’ Finance Minister Vu Van Ninh said in an interview at a conference in Hanoi recently.

Concerns over the worst housing slump in 27 years reining in the US economy is deterring investors from high-risk, high-yield debt.

The Southeast Asian nation delayed the bond sale, which was initially scheduled for September and will be its second overseas security, due to turbulence in the markets.

The global markets are still not in a favorable condition for Vietnam to sell the bond, Ninh said.

The risk of companies and governments in Asia excluding Japan defaulting on their debt has increased on concern about the US slowdown.

The region’s index of 20 high-risk, high-yield borrowers rose by 47 basis points to 3.79 percentage point Sunday from January 2.

A basis point is 0.01 percentage point.

“All the necessary preparations have been completed, we are just waiting for the market to get better,’’ Nguyen Thanh Do, director of the finance ministry’s external financing department, said in a telephone interview from Hanoi.

The government plans to market the bond to investors in Singapore, where it will be listed, one week ahead of the auction, Do said.

The sale is being managed by Barclays Capital, Citigroup Inc. and Deutsche Bank AG.

The Ministry of Finance late December had postponed the plan to sell $1 billion of dollar-denominated sovereign bonds until the first quarter of this year due to strong dollar liquidity at home.

The issue, originally scheduled for October, has been delayed twice.

The reason for the delay was that the government worried about the influx of dollars into the economy but we figured the impact would be minimal as most of the dollars raised from the bond sale would be spent overseas for equipment import, according to the ministry.

The government is to lend part of proceeds from the debt to state oil group PetroVietnam to import equipment for the $2.5 billion Dung Quat refinery, the Southeast Asian country’s first.

Other recipients of the proceeds include state-owned shipping firm Vinalines, Song Da Corp. and engineering firm Lilama, to buy cargo tankers and build power plants in Laos.

In October 2005, Vietnam sold its debut Eurobond worth $750 million, having received orders for more than $4.5 billion.

The issue helped set a benchmark for the country’s creditworthiness and similar issues by domestic firms.