Thursday, June 2, 2011

Vinashin Seeks 90% Debt Forgiveness on Defaulted Local Bonds

By Bloomberg News
(Updates with Moody’s comment in fourth paragraph.)

June 2 (Bloomberg) -- Vietnam Shipbuilding Industry Group, the state-owned company with more than $4 billion of debt, asked holders of a local-currency bond it defaulted on in April to write off as much as 90 percent of the money owed, according to a bondholder who met with company officials in Hanoi last week.

Officials told creditors the shipyard is unable to make any payments until 2015 at the earliest, Pham Viet Bac, general director of Ho Chi Minh City-based Sabeco Fund Management, which holds 30 billion dong ($1.5 million) of Vinashin bonds, said in a phone interview yesterday.

The shipbuilder’s financial difficulties have raised questions about the extent Vietnam’s government will support state-owned enterprises, threatening to undermine investor confidence in the nation as it aims to accelerate privatization. A missed payment by Vinashin to international lenders in December showed government support for state companies isn’t guaranteed, Moody’s Investors Service said in an April 20 report.

“The Vietnamese government has a long way to go in terms of restoring its credibility with investors,” said Christian de Guzman, a Singapore-based assistant vice president at Moody’s. “Investors will be wary of dealing with the government and state-owned enterprises, given these developments.”

Vinashin Chief Executive Officer Truong Van Tuyen declined to comment when reached by phone at his office yesterday. Calls to Chairman Nguyen Ngoc Su weren’t answered.

Vinashin Debts

The Hanoi-based company almost collapsed with debts of 86 trillion dong as of June last year, Vietnam’s government said Aug. 4. The government has said the company needs to narrow its focus after diversifying beyond shipbuilding into businesses including securities and tourism.

Prime Minister Nguyen Tan Dung asked police to investigate whether there are any signs of corruption at the company, Tuoi Tre newspaper reported in April. Vinashin accounts for as much as 80 percent of Vietnam’s domestic shipbuilding capacity.

Vinashin failed to pay a 9 percent coupon due April 13 on a 3 trillion dong, 10-year bond issued in 2007, according to Sabeco’s Bac.

The shipbuilder asked foreign lenders for a one-year extension after missing a $60 million principal payment in December on a $600 million syndicated loan, Chairman Su said in February.

‘Classified’ Audit

The shipbuilder has amassed total debts of 96.7 trillion dong, while total assets were 92.6 trillion dong as of Dec. 31, 2009, Lao Dong newspaper reported today, citing an audit by the Government Inspectorate.

Vinashin told bondholders at the meeting it wouldn’t provide a copy of its latest audit as the document is “classified,” said Bac.

“I’m very disappointed,” said Bac, who attended the meeting at Vinashin’s headquarters along with about 20 other creditors. “I want the company to be transparent to its creditors. We have the right to know.”

Vietnam’s bonds slumped at the end of 2010 as Moody’s and Standard & Poor’s cut the nation’s credit rating in December with a negative outlook. Moody’s, which rates Vietnam four levels below investment grade at B1, cited the risk of a balance of payments crisis and a drop in foreign reserves as inflation accelerates and the currency weakens.

S&P has concerns over Vietnam’s banking system and ranks the country at BB-, the third highest non-investment grade level.

Government debt rallied as the government approved a plan in February to tackle quickening inflation with higher interest rates and implemented measures to boost the local currency’s value. Vietnam’s year-on-year inflation rate in May reached 19.78 percent, the highest in more than two years, according to the General Statistics Office in Hanoi.

Vietnam’s dollar bonds are posting the best performance in Asia this year, returning 6.1 percent, according to indexes compiled by HSBC Holdings Plc.

--K. Oanh Ha. With assistance from Nguyen Dieu Tu Uyen in Hanoi, Lilian Karunungan in Singapore, James Regan in Hong Kong. Editors: Douglas Wong, Ed Johnson

To contact the reporter on this story: K. Oanh Ha in Hanoi at oha3@bloomberg.net

To contact the editor responsible for this story: Edward Johnson at ejohnson28@bloomberg.net

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