By the end of the first quarter (Q1) of 2019, more than 10 companies on the stock market recorded negative equity. This causes concerns for banks which offered loans to these companies.
Currently, Northern Shipping Joint Stock Company Nosco (NOS) currently records the largest negative equity in the market with a negative 3.654 trillion dong equity.
By March 31st 2019, the total assets of NOS reached 1.336 trillion dong. However, the liabilities amounted to 4.991 trillion dong, which means that NOS’s liabilities are fourfold higher than total corporate assets. In particular, financial leasing loans accounted for 3.009 trillion dong.
In addition to business operation, debt is currently a major burden of Nosco when interest expenses are always high and the gross profit, despite growing, is still not sufficient to offset the periodic interest payment. That makes the company unable to escape from the loss-making situation with accumulated losses reaching 3.913 trillion dong.
The periodic net cash flow of Nosco has always been in negative state. In the 2018 audited financial statement, auditors assessed that the company’s ability to operate continuously depends on the future profitability and the continued investment of owners. Vietnam Maritime Corporation is still holding 49 percent stake of NOS.
The creditors of NOS are fairly diverse, from the parent corporation, some businesses and individuals. However, the majority of the debts are bank loans. By the end of Q1 2019, NOS had a debt of over 1.132 trillion dong from Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank), 453 billion dong from Southeast Asia Commercial Joint Stock Bank (SeABank), etc. and some other debts from Agribank, Maritime Commercial Joint Stock Bank (MaritimeBank), Vietnam International Commercial Joint Stock Bank (VIB), and Vietnam Development Bank (VDB). In Q1 2019, NOS recorded a reduction of four billion dong debt from An Binh Commercial Joint Stock Bank (ABBank).
Previously, auditors mentioned that from 2016, Nosco was recording a reduction in the value of the loan at SeABank Hai Phong branch with the amount of 637.2 billion dong, equivalent to the remaining value of Nosco Victory vessel which was a secured asset for the loan. However, by the time of auditing the 2018 separate financial statement, auditors had not collected all the documents related to the handling of the loan from the bank, so they could not give opinions about this loan balance.
On the other hand, the secured asset for this loan Nosco Victory vessel has been sold by the bank to collect the debt principal. The company does not continue to make interest deductions in advance on this loan. The total amount of interests to be deducted based on the outstanding loan balance is 32.9 billion dong.
In addition to Nosco, Anvifish Joint Stock Company (AVF) is also in a serious negative equity status as its total assets are only about 66 billion dong but liabilities reach up to 1.867 trillion dong and all are short-term debts.
AVF’s equity is negative 1.801 trillion dong, in which the accumulated losses are above 2.248 trillion dong. Currently, AVF’s liabilities on total assets is up to 28 times. In addition, since many other problems could not be determined, the auditors refused to give opinions for the company’s 2018 financial statement.
By the end of 2018, AVF’s short-term loans were valued at 1.006 trillion dong, including 447.9 billion dong from Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank); 231 billion dong from VDB, 150.7 billion dong from Agribank, 89 billion dong from Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), 43.9 billion dong from Shinhan Vietnam, and 43.2 billion dong from Military Commercial Joint Stock Bank (MB). In 2018, VDB liquidated the land use right under AVF’s Chair cum general director Ngo Van Thu and Luu Thi Phuong Thao with a total area of 55,701.7 square metre, collecting 4.9 billion dong. The bank deducted from the debt principal an amount of 4.3 billion dong.
It is known that the most important goal of AVF is through Vietnam Debt Trading Company Limited (DATC) to negotiate with potential banks and partners about selling the debt and restructuring the company’s finance.
By the end of Q1 2019, there were more than 10 companies on the stock market suffering negative equity.
Specifically, the statistics of 12 companies showed that while the total assets were 6.704 trillion dong, the total liabilities amounted to 15.502 trillion dong, of which 8.117 trillion dong were debts and financial leasing loans. The total accumulated losses of these 12 companies are currently more than 12 trillion dong.
Except for Docimexco Joint Stock Company (FDG) which does not have debt and financial leasing loan and CaiLan Port Investment Joint Stock Company which has a small loan of 0.9 billion dong, almost all companies on the list of 12 have large financial debt.
The financial situation of these companies raises concerns about their ability to continue operations, particularly in the companies with high debt ratio in capital source. That leads to concerns about the ability to repay bank loans.
According to statistics on 21 commercial banks which announced the classifications of loans, the total bad debts increased by nearly 4.4 trillion dong in the first three months of the year, equivalent to an increase of 5.4 percent.
