Despite not booming like securities channel with strong primary and secondary trading throughout 2017 and continuous growth beyond expectation in the first three months of 2018, corporate bonds have brought trillions dong for enterprises which have issuing capacity.
Taking the lead in bond issuance, Saigon Securities Incorporation (SSI, on Hochiminh city Stock Exchange (HoSE)) in the beginning of the year successfully issued 1.150 trillion dong of convertible bonds to a foreign organisation. This type of bond is on a three-year tenor with expected conversion price of 31,000 dong per share and expected coupon rate of 4%.
At the same time in January, aggregate statistics of the Vietnam Bond Market Association (VBMA) and of Hanoi Stock Exchange (HNX) showed that on the primary market, the winning rate of the government bonds issued by the State Treasury fluctuated from 4.3%-5.7%, depending on type and tenor of the bond.
Previously, VBMA also pointed out that in December 2017, Viet Capital Securities Company (VCSC, stock code: VCI on HoSE) successfully issued 300 billion dong of registered corporate bonds which are non-convertible on two-year tenor. The maximum bond yield does not exceed the average medium-term mobilisation rate of Commercial Joint Stock Bank of Industry and Trade of Vietnam (VietinBank) and Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) plus a margin of 4.5%.
VCSC has recently announced the resolution of the Board of directors (BOD) on the bond issuance for the second phase in 2018 under private placement method with a mobilisation value of 800 billion dong. Thus, with the new issuance, VCSC will have over one trillion dong to supplement its business.
Similarly, SSI and VCI and securities companies such as SHS and VDS, etc. have also published their plan to issue bonds. It can be seen that depending on the bond type and tenor, the profitability is different. In general, the corporate bond yields that creditors have to pay for this fixed-rate asset are fixed in advance and lower than the lending rate on the same term via banking channel, not including the cost of issuance. Thus, this is the preferred channel of the members of the stock market with large capital needs to serve investors with margin trading and their own investment activities.
Certainly, corporate bonds in Vietnam is not the channel for everyone and not only for the group of securities companies. Enterprises which are well-audited with brand name, reputation, and good relationship with the network of institutional investors including banks and separate partners in the domestic and foreign markets are having big opportunities in this mobilisation channel.
Thanh Thanh Cong Bien Hoa Company (code SBT on HoSE) under Thanh Thanh Cong Group in the week before April 12th announced to issue 450 million bonds with a face value of one billion dong. This bond is non-convertible, with no warrants, but guarantee for payment. The tenor of the bond is one year since the issuance date will mature in 2019. SBT shares will be issued separately to less than 100 investors, including professional investors which are domestic and foreign organisations and individuals having financial capacity, with priority given to commercial banks, financial institutions and investment funds via issuing agents. The issuance is expected to be split into several phases, starting from the fourth quarter of 2017-2018 financial year with issuance price equalling to 100 percent of the bond’s par value. The goal of this bond issuance is to increase the size of SBT’s working capital and supplement working capital to expand production and business activities.
It is known that SBT has been promoting and meeting potential bondholders to ensure the success of the issuance, based on brand prestige, business strategy and specific plan to use capital. If successful, this will be the production and business company to successfully mobilise bonds with a large value issuance.
Forecasting about corporate bond this year, expert Le Ngoc Hoan believed that the annual general meeting (AGM) season in April 2018 will surely see may the plan to mobilise capital by issuing this fixed-rate debt instrument; particularly, for the group of securities companies being in need of capital to pump margin when the market is hot and the group of real estate companies having long-term capital needs for developing projects while the credit will be tightened according to the decision of the State Bank of Vietnam (SBV).
However, the risk of corporate bond channel is the weak secondary trading and low liquidity. Thus, this remains a narrow playground for familiar players. For enterprises with unsatisfactory business results, the chance to mobilise capital via bond is even narrower and the pressure to repay both principal and interest at the bonds’ maturity is heavier.
An expert said that to successfully issue corporate bonds, in many cases when the enterprises are not “big” enough, in addition to offering attractive bond yields, enterprises must consider issuing bonds with secured assets.
