Investors suspect TMG bond issue

Investors suspect TMG bond issue

A bond issue by Vietnam’s Thien Minh Group, known for its acquisition of Victoria Hotels & Resorts two years ago, has come under scrutiny.

Early last month Thien Minh Group (TMG) announced a $47.6 million bond issue which raised eyebrows as this amount is considerably over the group’s total equity value of $33.3 million.

The issuance volume is just over the $45 million the group borrowed from the International Financial Corporation ($12 million) and banks including the ACB in 2011 to acquire the Victoria group. Victoria’s properties were put up as collateral for the loan.

At the time of the acquisition, Thien Minh’s total assets were valued at around $23.8 million.

Investors are concerned about the validity of reasons the company claimed for the issuance.

According to a document released by Thien Minh explaining the bond issue, $18 million would be put into restructuring debts, the details of which remain unclear.

Another $17.6 million was slated for investment into hotels and other projects.

The collateral for the issuance is not clear in the document, which simply states it as “Thien Minh’s properties and other assets as per the agreement”. The value of the collateral versus that of the bonds was also not made clear.

The document also fails to clarify the rate of return on the bonds and the schedule for debt payments. The lack of transparency has some investors very worried.

“This is a large amount of money to raise at one time and I have no idea what exactly the money will be going into which makes me hesitant to invest,” said one investor.

VIR’s attempts to contact Tran Trong Kien, chairman, and Ho Viet Ha, deputy general directors of Thien Minh, were met with silence.

This is not Thien Minh’s first debt restructuring after its acquisition of Victoria. It was reported that by late 2012 the group reduced its short-term debts by half to around $13.8 million thanks to a successful restructuring. At the same time its long-term debts nearly doubled to $21.4 million including $4 million on a one-year deadline.

Pressure to pay down interest rates following the acquisition resulted in the company’s pre-tax profits only hitting $1.37 million last year, despite a net rise of 28.2 per cent in revenue to $51.28 million. Its after-tax profits fell by 40.7 per cent to around $670,000 after the company changed its accounting practices following the acquisition.

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