Illustrative image (Photo: Masan) In the context of tightened and expensive domestic capital sources, mobilisingcapital from abroad is an opportunity for local reputable enterprises andbanks, and many of them have recently announced huge loan agreements withforeign financial institutions.
A recent report from financial data service provider FiinGroup showed thechannel for raising capital through domestic bonds is gloomy, but many domesticenterprises still succeeded in mobilising international loans. Specifically,ten deals announced recently had a total value of nearly 1.92 billion USD.
Among the deals, VPBank signed a loan agreement worth 500 million USD onNovember 11 with five major financial institutions – Asian Development Bank(ADB), Sumitomo Mitsui Banking Corporation (SMBC), Japan InternationalCooperation Agency (JICA), Australia and New Zealand Banking Group Limited(ANZ), and Maybank Securities Pte. Ltd, a member of the Maybank InvestmentBanking Group.
CEO of VPBank Nguyen Duc Vinh said the capital sources will help VPBank promotecredit programmes for small- and medium-sized enterprises in Vietnam,businesses owned by women, and businesses in the fields of healthcare,education, hygiene, traffic, and building social housing, giving them access torelatively low-cost capital for development.
SeABank on November 12 said it and the US International Development FinanceCorporation (DFC) had signed a loan agreement worth 200 million USD. Withsupport from DFC, SeABank will improve its financial capacity to betterimplement the proposed projects, focus on the credit gap and solve the gapbetween the financial needs of the market and the existing source of money inthe economy.
Previously, VIB completed the disbursement of a 150 million USD loan from theInternational Finance Corporation (IFC), a member of the World Bank Group. Witha term of five years, the IFC-led loan aims to support VIB to boost its loanportfolio for individual customers who are looking to buy, build, and repairhouses. Meanwhile, at least 30% of the disbursement value will be financed forhome loans worth less than 35,000 USD.
Not only domestic banks, local enterprises also announced hugeforeign capital-raising contracts. Specifically, F88 Business Joint StockCompany said it had successfully raised a 60 million USD loan from CLSA CapitalPartners (HK) Limited (Lending Ark) and Lendable. Since the beginning of theyear, F88 has raised 70 million USD from the international fundraising market.
Masan Group Joint Stock Company (Masan) and The Sherpa Company Limited - a directsubsidiary of Masan – have been recently provided a 600 million USD syndicatedterm loan. This was the largest syndicated loan with the longest term thatMasan has ever raised, attracting 37 lenders in the fundraising process.
Previously, Be Group Joint Stock Company signed a loan contract of up to 100million USD with Deutsche Bank (Germany) while Viet Capital Securities JointStock Company (VCSC) signed a loan contract with a limit of 105 million USD andthe right to be extended up to 150 million USD with a group of foreign banks.
At the end of October 2022, Loc Troi Group successfully approached a 100million USD credit package provided by Military Joint Stock Commercial Bank(MB) and six international banks with syndicated loans to expand high-qualityrice production.
According to Huynh Van Thon, chairman of Loc Troi Group, besides the 100million USD signed loan contract, the group hopes to raise another 1 billion USDfrom the international capital market to develop one million hectares ofhigh-quality rice. With the 100 million USD loan, the group has reached anoptimal and stable interest rate agreement, which will help it to developstably in the near future.
According to experts, as fundraising in the domestic market is facingdifficulties, the huge deals are a bright spot to help domestic enterprisescontinually promote their business and production, and create a driver forfurther growth next year. At the same time, the success is also a motivationfor other enterprises to seek new capital.
They said international rating agencies’ upgrade of Vietnam had createdfavourable conditions for Vietnamese enterprises to have access tointernational capital with reasonable interest rates. In September 2022,Moody’s Investors Service upgraded Vietnam’s long-term issuer and seniorunsecured ratings to Ba2 from Ba3. Previously, S&P Global Ratings raisedits long-term sovereign credit rating on Vietnam to BB from BB.
Though international capital is currently abundant, not all enterprises canaccess it due to rigorous standards from international financial institutions.To be qualified for foreign loans, enterprises must have a good reputation,strong financial strength and transparent public data, which are audited byinternational auditing organisations. Moreover, they must have feasible capitaluse plans and professional consulting organisations.
Besides, loans for sustainable development projects, SMEs, women-ownedenterprises and social projects are also often prioritised for disbursement byinternational financial institutions.
However, Dr Nguyen Huu Huan, head of HCM City University of Economics’ FinanceDepartment, noted enterprises need to use measures to minimise exchange raterisks when raising foreign capital. He said the US dollar has so far strengthenedmore than 8% against the Vietnamese dong.
Besides, international capital is not cheap as the US’ federal funds ratecurrently hits 4% per year, Huan said.
However, he admitted in the context of a cash shortage and difficulties infundraising in the domestic market, Vietnamese enterprises must diversifycapital mobilisation channels and international capital mobilisation remains aneffective solution.
FiinGroup’s experts said though interest rates of foreign loans are not cheapwith many costs including nominal interest rate, exchange rate insurance cost,guarantee cost and transaction fees, the successful deals are still quite apositive development in the context of tightened domestic fundraising channels.
According to FiinGroup’s experts, the deals also show the confidence of foreignfinancial institutions in the long-term growth of large Vietnamese enterprises,whose information and credit profile are clear. Fundraising is still possibleand the level of risk is reflected in interest rates. Foreign currency loanshave also contributed to solving the problem of debt maturity pressure and theneed for debt restructuring of some enterprises./.
VNA
