Vinashin creditors approve zero-coupon extension
Vinashin creditors approve zero-coupon extension
Vietnamese state-owned shipbuilder Vinashin is set to replace its defaulted US$600m loan with a 12-year government-guaranteed bond after a majority of creditors consented to its latest restructuring proposal.
A notice sent out on Tuesday to all lenders said Vinashin had advised facility agent Credit Suisse that the proposal had received approval from 75% of creditors in terms of value (amounts held) and 51% in terms creditors (simple majority).
The proposal involves swapping the US$600m loan, plus accrued and unpaid interest of US$23m, with US$623m in zero-coupon bonds. The bonds, with a guarantee from the Ministry of Finance, will have a 12-year tenor. Interest on the bonds will accrete at 1% per annum and will be paid on maturity, along with the principal.
The agreement comes more than two years after Vietnam’s government shocked markets when it refused to stand behind a letter of comfort on a US$600m eight-year loan signed in 2007, leading Vinashin to default on a US$60m instalment due in December 2010.
The restructuring effectively confirms that the government is willing to take over the state-owned company’s offshore obligations, albeit with a big haircut through the deferred maturity and reduced interest rate.
The agreement, however, could be further delayed by holdout investors. If the proposal does not get the consensus of all creditors, a scheme of arrangement will be implemented in the UK, which could take around six months to complete and could, potentially, carry the same terms as the current proposal.
The remaining creditors have also been given more time to revert with their vote on the proposal. The deadline for responses has been further extended to March 20. The company had originally sent out the proposal in early February with a February 15 deadline, which was extended to March 1.
KPMG is advising Vinashin, or Vietnam Shipbuilding Industry Group, on the restructuring.
The US$600m eight-year loan was signed in June 2007, with participation from more than 20 banks, most of them said to be commercial banks. It was increased from an original of US$200m and was the largest syndicated loan from Vietnam. Credit Suisse was the mandated lead arranger and bookrunner. The facility, with an average life of 5.75 years, paid a margin of 150bp over Libor and upfront fees ranging from 5bp to 25bp in 2007.
Some of the original lenders remain in the creditor group alongside institutional investors including hedge and vulture funds, which bought the paper from banks that sold out their exposure following the default.
International Financing Review Asia (IFR Asia)
