(Bloomberg) — Vietnam’s leaders are taking urgent steps to avert a potential financial crisis as companies struggle to tap funding sources and risk defaulting on bond payments in the next two years.
Prime Minister Pham Minh Chinh ordered the finance ministry to submit measures to secure the financial market and investors’ rights before December 20, according to a statement on the cabinet’s website. The ministry, meanwhile, is proposing a decree revision that would allow companies to extend corporate bond maturities as much as 2 years if approved by bondholders representing more than 65% of total outstanding bonds of a company, Thanh Nien newspaper reported.
The ministry’s proposal aims to help businesses raise capital as well as restructure debt amid a liquidity crunch in Vietnam’s financial and monetary markets, according to the newspaper. Companies are struggling to sell new bonds and will face difficulties repaying maturing bonds next year and in 2024, Thanh Nien reported.
The State Bank of Vietnam directed commercial banks to set a 5% interest rate on some standing home loans in 2023, beginning Jan. 1, according to a statement on the regulator’s website.
The benchmark VN Index in morning trading gained as much as 1.4%, led by advances of bank stocks. Bank for Foreign Trade of Vietnam JSC, or Vietcombank, rose as much as 1.9% while Vietnam Technological & Commercial JSB was up as much as 3.1%. Many real estate stocks also rose, with No Va Land Investment Group and Nam Long Investment Corp. advancing as much as 4.4% and 3.3%, respectively.
Vietnamese companies had a total of 745.4 trillion dong ($31.5 billion) of corporate bonds maturing this year through 2024, Zing News reported in August.
The prime minister directed the ministry to review the payment ability of bond issuers, especially those with bonds maturing in 2022 and 2023, the government statement said. He urged issuers of corporate bonds to enter into negotiations with investors if they need to restructure debt or face other financial difficulties.
The ministry proposes allowing enterprises, in agreements with bondholders, to convert bonds into loans or other assets to pay the debt, Thanh Nien reported. It seeks to postpone for one year the implementation of a compulsory credit rating of bond issuers to January 1, 2024, and the regulation limiting bond purchases to professional investors, also by one year. The ministry also looks to delay for one year a requirement on shortening the bond distribution period to 30 days from 90 days.
–With assistance from Nguyen Kieu Giang.
(Updates the story with home loans in the fourth paragraph and shares in the fifth paragraph.)