Bonds help firms raise capital
Bonds help firms raise capital
Enterprises with the capacity to do so should consider raising capital through bond issues, reducing their dependence on bank loans, experts say.
They say that bonds can now be seen as a safe and effective way for many enterprises to mobilise capital, particularly for long and medium-term needs, particularly at a time when it is hard to access bank loans at acceptable interest rates.
Despite several cuts effected recently in both deposit and loan interest rates, access to bank loans has not improved significantly as enterprises struggle to meet loan conditions in tough economic circumstances, and banks are wary of lending in the context of rising bad debts.
Currently, as much as 80 per cent of the capital needed by enterprises come from banks, and this reliance can reduce only if long-term capital channels are developed, the experts say.
With the capital raised through bonds, enterprises can make long-term business development plans and exert better control over interest rate risks. They can also stabilise their capital resources and build up their credibility in the financial market.
In recent years, some major enterprises, corporations and State-run economic groups have been successful in raising capital through bonds.
The latest is Viet Nam National Coal and Mineral Industries Group (Vincomin). The corporation has successfully issued VND500 billion ($24 million) worth of bonds in the domestic market, a part of its yearly plan of VND3 trillion ($143 million).
The bonds, with a five-year term and a floating interest rate, will help Vinacomin fund its coal, minerals and power generation projects.
The Viet Nam Bank for Industry and Trade (VietinBank) and the Australia and New Zealand Banking Group (ANZ) are the issuing agents for Vinacomin.
Vinacomin's bond issue is said to mark the restart of Vietnamese corporate bonds after a freeze that has lasted almost two years.
Tarez Muhmood, general director of ANZ Viet Nam, told Thoi Bao Kinh Te Viet Nam that Vinacomin's bond issue is a judicious decision to raise long and medium-term capital resources when the country's macro-economy started to see positive changes and the liquidity of dong has improved.
Le Duc Tho, deputy director of Vietinbank, also said that Vinacomin's successful bonds issue proves that investor confidence is returning.
"This is the appropriate time for investors to return to investing in bonds," Tho told the newspaper.
However, an official with a major foreign bank said that bond issuance would be successful only for enterprises with effective operations that have clear and transparent financial reports.
The bond issuers are also required to have clear capital use plans and financial statements checked by foreign and domestic auditors, he said.
To ensure success, enterprises should prepare related documents and have them ready so they can take quick advantage of opportunities when they arise, he suggested.
At a time when the world economy in general and the Vietnamese economy in particular are still facing several difficulties and risks, enterprises without sound fundamentals are likely to find it difficult to issue bonds to raise capital, he said
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