PM demands legal improvements for bond market

Vietnam’s Prime Minister Pham Minh Chinh on Tuesday asked the Finance Minister to take urgent measures to ensure the corporate bond market operates in a transparent, safe and efficient manner.

The ministry was instructed to improve legislation for the issuance of corporate bonds, especially private placements. The proposed improvements must be submitted to the government no later than December 20.

The minister was told to demand corporate bond issuers refund bondholders both original amounts and yields as scheduled. In cases of financial problems, issuers should negotiate with bondholders to reschedule refunding plans for mutual benefit in a risk-sharing manner.

The corporate bond market has been narrowed down by the government's tightened supervision over issuances of corporate bonds via private placements under Decree 65 and market concerns following the arrests of entrepreneurs on charges of committing fraud in this area.

The value of corporate bonds issued via private placements in the country dropped 56% year-on-year in the past 11 months, while that of public offerings was down 60%.

Since the beginning of the year, businesses have bought back VND163,974 billion ($6.96 billion) in bonds, up 32% year-on-year.

For its part, the ministry has proposed to the government several "rescue" measures in a draft amending Decree 65.

In the first measure, the ministry proposes a one-year delay to tightened regulations on "professional securities investors" to the beginning of 2024 instead of 2023.

Decree 65, issued on September 16, supplements regulations to increase the professionalism of retail investors when buying privately placed corporate bonds, and minimize fraud by retail investors to buy privately placed corporate bonds.

The second is a delay until 2024 for the requirement that issuers must have credit ratings when offer large amounts of bonds.

Next, the ministry wants issuers to be allowed to get a two-year extension for terms of their issued bonds. Such an extension would be allowed only if at least 65% of holders of issued bonds approve. Under the current regulations, issuers cannot make such an extension.

Fourthly, the ministry wants to give issuers more time in their issuances. Currently, the deadline for the first issuance after the information is publicized is 30 days, and the total time for all issuances is six months starting from the initial period. The ministry said it wants this measure to be applied after 2024.

The decree aims to give companies more time and options to improve their cash flows and ability to pay bondholders, limiting default risks.