Firms wary after Tân Hoàng Minh debacle, retire bonds, cancel issues

July 11, 2022 - 08:48
Gelex Group Joint Stock Company building in Ha Noi. — Photo

Compiled by Thiên Lý

On June 8 the Gelex Group Joint Stock Company prematurely retired all its bonds totally worth VNĐ500 billion (US$21.74 million).

They had only been issued on December 31, 2021, and had a three-year maturity.

This means Gelex retired the bonds within five months of issuance.

Earlier Gelex Group announced buyback of bonds totally worth of VNĐ1.2 trillion and VNĐ300 billion on May 17 and 19 respectively.

Another company, VIX Securities Joint Stock Company, also opted for early retirement of all its bonds worth VNĐ300 billion.

They were issued on April 5, 2021, and are due in April 2024.

Intimex Việt Nam recently retired VNĐ2 trillion worth of bonds before their maturity date.

Banks too have started to repurchase their bonds prematurely.

The Phương Đông Joint Stock Commercial Bank bought back all its bonds with a combined value of VNĐ200 billion on May 12.

TPBank’s bonds worth of VNĐ1.8 trillion were repurchased in April before maturity.

Premature bond redemption in April stood at VNĐ11.9 trillion worth as against VNĐ12.8 trillion in the previous three months combined.

The Ministry of Finance also reported that the total private placement of bonds plunged to around VNĐ30 trillion (US$1.3 billion) in April, down 33 per cent year-on-year.

The question is why so many firms are deciding to call their bonds before the maturity date?

Analysts point to Tân Hoàng Minh Group’s cancellation of nine bond issues as a major factor that has made companies cautious about new issues and even redeem their bonds before maturity.

The Tân Hoàng Minh Group saw on April 3 its nine bond offerings with a combined value of VNĐ10.03 trillion cancelled by the State Securities Commission (SSC) for providing false information and concealing information to make private offerings.

They were to have been issued by three subsidiary companies, Viet Star, Winter Palace and Soleil.

After the SSC’s crackdown, the Ministry of Finance amended and supplemented Decree153 on issue and trade of corporate bonds, incorporating tougher conditions for bond issuance, especially private placements.

Meant to protect investors, they made collateral to back the issue mandatory for businesses with high debt ratios.

Besides, a bond trading exchange will be set up and businesses need to register, meaning transactions will no longer be based on agreements.

Analysts said these stricter regulations have made businesses wary about issuing bonds and in advertently falling foul of regulators.

Besides, many companies that went ahead with issues rapidly amended information in their prospect uses about the proposed use of capital raised from the bond issuance.

The early retirement of bonds are reduction in interest expenses – bond coupon rates are usually higher than bank interest rates – and a lower debt to equity ratio, which looks better in a balance sheet.

More work needed

Experts said however that while the Government’s moves should help make the market healthier and limit the participation of weak firms, preclude fraud and, of course, protect investors, they do not go far enough to stabilise the overall securities market, which would make it easier for firms to raise capital and safer for investors.

Under Decree 153/2020, authorities do not have to license private placement of bonds, and issuers have the right to decide the terms and conditions themselves.

In the event, there are still loopholes related to privately placed unsecured bonds and privately placed bonds secured by low-quality collateral, analysts said.

Authorities need to make further amendments to the Law on Securities and Decree 153 to plug them, they said.

They called for modifying regulations on issuance purposes to ensure issuers strictly adhere to them.

They said law makers could introduce regulations to allow bondholder representatives to better monitor the use of proceeds and the extent to which issuers comply with their commitments.

Regulations on bond ratings could also be incorporated to raise the bar further, they suggested, pointing out that investors could then refer to the ratings to assess their risks.

They stressed the need to establish an exchange for privately placed bonds to enhance liquidity and bring bonds being traded on the secondary market under control.

Regulations on information disclosure should be made stricter to boost transparency on the part of issuers, they said.

They called more efforts to develop a proper secondary market on which investors could buy and sell securities. It is what most people typically think of as the “stock market” though stocks are also on the primary market when they are first issued.


A finance ministry official said the ministry is seeking amendments to the Securities Law and the Law of Enterprises by the National Assembly to improve the legal framework for corporate bond issuance and trading.

The ministry also plans to strengthen the capacity of regulatory agencies, stock exchanges and the Việt Nam Securities Depository, and post officials with impeccable professional and ethical qualities to key positions to ensure the market operates effectively.

It would also direct the securities watchdog and related units to continue restructuring the market, improving the performance of intermediary institutions and “developing professional investors” to make the securities market an effective and fair long-term capital mobilisation channel for the economy and businesses, he said.

Deploying information technology for the operation, management and development of the securities market is also a major task, he said.

The finance ministry plans this year to adopt a new technology system and expects this to be the foundation for effective market reform and operation, he added.

The Government will continue to pursue its goal of further developing the capital market to reduce enterprises’ reliance on bank credit.

For this, it plans to give priority to developing the private bonds market.

Experts said the corporate bond market is an important capital mobilisation channel for the medium and long terms for enterprises. — VNS