Rubber: one of the major activities of HAGL. Photo: Duc Anh
Struggling group looks to re-arrange activities to deal with major debts.
The debt-ridden HAGL Group has been given approval to change the purpose of two of its projects planting grass for cattle feed to planting fruit trees for its fruit company.
The Gia Lai Provincial People’s Committee in the central highlands permitted HAGL to change the purpose of two land plots of 195.8 ha and 488.8 ha in late May, under an official document from Deputy Chairman Kpa Thuyen.
The document was in response to a HAGL letter sent in the middle of February.
Picture: Document released by the Gia Lai Provincial People’s Committee to approved in principle HAGL to change purpose of the two projects
HAGL decided previously to terminate another cattle feed project, which applied high technology and had investment of VND1.6 trillion ($71.48 million), in the central highlands province of Kon Tum, and the Kon Tum Provincial People’s Committee has given in-principle approved to the project being terminated.
HAGL is a large privately-owned agriculture and real estate company with debts totaling $1.25 billion as at the end of March, equal to 0.6 per cent of Vietnam’s GDP in 2015.
The change of purpose it to reorganize its business activities and ease the pressure of debt repayments.
Vietnam Customs, meanwhile, is consulting with the Ministry of Industry and Trade to cut import taxes on HAGL’s sugar produced in Laos and imported by the Hoang Anh Gia Lai Import-Export Trading Company.
HAGL is also well known in the rubber industry and has suffered from falling prices. Mr. Eugene Tarzimanov, Vice President and Senior Credit Officer of Moody’s Investors Service, told VET that “on agriculture sector exposures, the rubber industry was more negatively affected in 2015 because of material price decreases.”
Recently, ten banks, who are creditors of HAGL, proposed a debt restructuring plan that includes lower interest rates and loosened debt maturity. The debt restructuring, which has the potential to be the largest in Vietnam since Vinalines’ in 2013, is credit negative for Vietnamese banks exposed to HAGL because it will reduce and extend the cash flows of HAGL’s debt obligations and lower loss-absorption buffers, according to Moody’s Investors Service.
According to Mr. Tarzimanov, “the negative impact on the profitability of the banks will come from possibly lower interest rates on HAGL loans and bonds - thereby banks will earn less on these assets or maybe even earn nothing - if interest rates are reduced significantly.”
HAGL has confirmed its total debts amounted to VND27.099 trillion ($1.21 billion) as at the end of last year, an increase of 50 per cent compared to the VND18.126 trillion ($824 million) reported for 2014.
At the end of the first quarter of 2016 HAGL’s revenue had increased to VND1.97 trillion ($84.7 million). However, due to credit costs of VND304 billion ($13.55 million), the group recorded profit of just VND90 billion ($4.01 million); significantly lower than the VND303 billion ($13.5 million) reported in the first quarter of 2015.
In late April, at the annual general meeting of the Bank for Investment and Development of Vietnam (BIDV), BIDV Chairman Tran Bac Ha said that HAGL should be allowed to sort out its affairs without comment from other parties.