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Banking & Finance

Vietinbank seeks debt/equity swap with Vinalines

Released at: 22:19, 09/12/2014

Vietinbank seeks debt/equity swap with Vinalines

Bank may swap trillions of VND worth of debt into share ownership of Vinalines' ports.

by Hung Khanh

The State Bank of Vietnam (SBV) has agreed with the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) becoming a strategic shareholder of the Vietnam National Shipping Lines (Vinalines) in a debt/equity swap when the State-owned shipper conducts the equitization of its port members.

New solution

The policy will initially be applied to Hai Phong Port and Da Nang Port. If it proceeds smoothly the bank will be strategic shareholder of the two ports in the next share issue early next year.

As at the end of 2013, Vinalines owed banks nearly VND48 trillion ($2.3 billion), according to a report from the government presented to the National Assembly. In a formal document sent by the General Director of Vietinbank to Vinalines at the beginning of this year, it was stated that Vinalines owed Vietinbank more than VND5 trillion ($238 billion).

The SBV has therefore said that the abovementioned move would not only help creditors resolve their bad debts but also reduce the difficulties facing Vinalines. It also suggests this will be new solution in refinancing State-owned enterprise (SOE) debts.

If Vinalines does not swap the debt into equity it will be difficult for it to repay Vietinbank, while such a swap would help the bank reduce its bad debt ratio. 

On the other hand, when a number of ports conducted IPOs last summer, such as Hai Phong, Da Nang, Nha Trang, Quang Ninh, they only managed to sell around 5 per cent of their stakes. By swapping its debt, Vinalines would “kill two birds with one stone” - reducing its debt while acquiring a trustworthy strategic shareholder.

Complicated process

To gain SBV approval, both sides met numerous times this year to reach a consensus and submit the plan to the central bank.

Mr. Le Anh Son, General Director of Vinalines, previously said that Vietinbank was the first major creditor expressing a desire to become a strategic shareholder when Vinalines’ port members conducted their equitization.

When Hai Phong Port issued shares to the public for the first time, in April this year, Vietinbank requested Vinalines seek acceptance from the Ministry of Transport to swap their debt into equity and Vietinbank would then become a major shareholder of the port. The bank confirmed with Vinalines that it was fully qualified to become a strategic shareholder, but the SBV turned down the proposal because existing regulations were not applicable.

The SBV then sought commitments from the Ministries of Finance, Planning and Investment, and Transport on the proposal’s feasibility and the legitimacy of such a debt transformation before giving the go-ahead for the proposal to proceed.

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