Large corporations lure capital through corporate bond issuance

Large corporations lure capital through corporate bond issuance

The finance market has heated up with a series of large bond issuance campaigns launched by major companies.

Rapid-fire information came in early June about the large-scale corporate bond issuance campaigns. The common characteristic in all the affairs was that the issuers were all major players in their business fields, with total assets worth trillions of dong.

Masan Consumer Holdings, a subsidiary of Masan Group (MSN), has announced the issuance of VND9 trillion worth of corporate bonds, the biggest ever affair in Vietnam.

Official information says these are 5-year bonds issued to “optimize the balance sheet and reduce the expenses on loan interest”.

Sources say MSN would use the money to be mobilized through bond issuance to pay previous loans which have high interest rates.

The biggest buyers of the bonds have been found, and all of them are bankers.

Vietcombank has registered to buy VND5.4 trillion worth of bonds, VIB Bank VND1 trillion and BIDV VND900 billion.

Prior to that, local newspapers reported that Techcom Securities had successfully arranged the issuance of VND2 trillion worth of corporate bonds for Vingroup. These are 5-year bonds with interest rate of 11 percent for the first year.

By March 31, 2015, Vingroup had had five domestic bond loans and two international bond loans worth VND17 trillion in total.

More recently, Minh Phu Seafood also successfully mobilized capital through a large bond issuance affair.

VietinBank on June 11 bought VND1 trillion worth of Minh Phu’s 5-year bonds which have the fixed interest rate of 7.5 percent per annum.

Minh Phu once issued bonds before, two months ago. And the buyer of the VND1.5 trillion worth of bonds was also VietinBank.

In general, analysts say, bond issuance usually aims to restructure debts and seek capital to expand production and business.

Though the interest rate is now on the rise again, analysts still believe that the current conditions are now favorable for businesses’ rollover.

They also believe that now is the right time for large corporations to borrow capital, when the national economy is recovering.

M&A projects may have prompted large corporations to seek more capital.

Meanwhile, SSI, which has issued VND800 billion worth of bonds so far this year, said it needs capital to restructure medium-term capital, preparing for the trading of securities derivatives in the future when a legal framework is created.

Analysts noted that the large volume of bonds issued is one of the reasons that banks’ credit growth has risen.

One report shows impressive credit growth rate of 4.8 percent in the first five months of the year, while it was 1.31 percent only in the same period last year.

vietnamnet