Coffee firms on bankruptcy verge over misusing loans
Coffee firms on bankruptcy verge over misusing loans
A number of coffee processing and trading companies in Dak Lak Province, the ‘coffee kingdom’ of the country’s Central Highlands, have gone bankrupt over repeated losses and many others are on the brink of sharing the same fate because they have all failed to use their bank loans effectively.
While it used to be one of the national largest coffee exporters two years ago, the Vinacafe Buon Ma Thuot, a subsidiary of the state-run Vietnam National Coffee Corporation, has had to stop buying and exporting coffee, as it has run out of capital while many of its assets have been suspended by banks over unsettled debts.
The company is still unable to repay the VND1.4 billion (US$66,553) worth of bank loans, which were mortgaged on a warehouse and some rubber growing land plots, according to CEO Vu Duc Tien.
The CEO attributed his company’s hardship to a wrong strategy it made years ago, when it borrowed huge bank loans to stockpile coffee in anticipation of a price surge.
“But then came a drastic price slump, sending us to a huge debt,” he said.
However, a local banker said the company’s losses are consequences of its misusing the bank loans.
The company had borrowed loans at exorbitant interest rates, then did not spend it on the coffee trading business, but on buying a VND100-billion truck fleet, a VND400-billion warehouse, and other realty assets, the credit official said.
Vinacafe Buon Ma Thuot is not a typical case in the Central Highlands province, as a number of other coffee businesses either have declared bankruptcy or are struggling to maintain operation.
Thai Phuc Co Ltd, for instance, could only export up to 2,000 tons of coffee a year over the last two years in order to have money to afford employee wages, Thai Phuc, its director, told Tuoi Tre.
Gloomy picture
Nguyen Xuan Loi, director of An Thai Co Ltd, suggested that banks and coffee businesses work together to figure out a solution to assist the latter amid these hard times.
“Banks should create conditions for businesses to settle their debts,” he said.
However, director of the Dak Lak branch of a commercial bank said the gloomy picture of the market is shaped by the businesses themselves.
“The businesses failed to use their loans effectively by investing in non-core sectors that have poor chance of recouping investment,” he elaborated.
The agriculture ministry has recently asked banks to create favorable conditions for coffee businesses to access loans to sail through the tough times.
“But no specific plans and policies have ever been proposed,” he said.
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