Public issuance, private placements to uplift corporate bond market

The Ministry of Finance is drafting amendments to the government's Decree 65, which took effect on September 16, 2022 to regulate corporate bond private placements in Vietnam and overseas issuances. Minister of Finance Ho Duc Phoc told The Investor about upcoming changes.

Please tell us the results of reviewing Decree 65 and the direction for amending it.

Since Decree 65 took effect, companies have issued bonds worth about VND10 trillion ($426.7 million). Of this, banks and credit institutions made up 21.79 %, real estate companies 25.3%, and manufacturing and service enterprises 52.28%.

Since September 2022, the corporate bond market has been seriously affected by the difficulties in the monetary market such as surging interest rates and a gaining U.S. dollar. After October 6, more woes appeared in the monetary and corporate bond markets due to Van Thinh Phat real estate company’s bond scam.

Current market challenges include low liquidity in the whole economy and low market confidence, while companies find it hard to issue new bonds but face heavy pressure to buy back their issued bonds before maturity, and they must pay due bonds.

Because of investor sentiment, investors massively sold off bonds they had bought, including those issued by companies with good health conditions and good business activities.

Regulators’ tightening the bond issuance process has also caused some concerns to both issuers and service providers.

Based on the assessment of the volatile market situation and following the Prime Minister’s instructions, the Ministry of Finance has reviewed Decree 65 and proposed a number of amendments.

Proposed amendments focus on postponing the implementation of a number of regulations on investors and credit rating requirements; at the same time, adding regulations allowing enterprises to change terms, exchange already issued bonds, and convert bonds into loans based on their agreements with investors.

The finance ministry is collecting opinions from relevant ministries, sectors, those subject to new regulations, experts, scientists, international organizations, among others to finalize the draft in order to send it to the Ministry of Justice before submitting it to the government.

According to finance ministry experts, postponing the implementation of the above-mentioned regulations will give the market more time to adjust.

Regulators’ recent crackdowns on violations in the market have helped investors better assess companies. This is expected to help prevent a rush to buy bonds issued with high coupon rates as investors will pay more attention to associated risks.

The would-be amended decree is expected to allow already issued bonds to get an extended payment time, with the maximum extension being two years. This will help ease the burden of payment, which would peak during the 2023-24 period.

According to forecasts by many experts, Vietnam's economy will in the coming time continue to maintain its current growth momentum. It is expected that in the period of 2025-2026, companies would basically get rid of poor liquidity problems in the market and complete their debt restructuring process.

Could you clear up the development orientation for the corporate bond market in 2023 and 2024?

The government's view is to continue developing a safe, healthy and transparent corporate bond market. Those in the market have to observe rules and laws.

In terms of investors, corporate bonds are for professional investors, while those individual investors not able to make proper analyses and evaluations are not encouraged. Market regulations also seek to protect such individual investors.

In addition to drafting amendments to Decree 65, the finance ministry is working with the Ministry of Planning and Investment to review the Securities Law, the Law on Enterprises, and related regulations in order to improve regulations for the stock market, improving Vietnam’s legal system.

The finance ministry will continue to develop a synchronous bond market via two ways namely public issuance and private placements.

For the first, the ministry seeks to create favorable conditions for issuers. The Minister of Finance has asked the State Securities Commission to review and simplify administrative procedures to facilitate businesses eligible to issue bonds this way, so that they can issue bonds to the public.

For private placements, the ministry has asked the stock exchanges in Vietnam to prepare trading platforms to develop a transparent and secure secondary market, and to improve management and supervision in order to mitigate risks.

Market regulators continue to improve the competitiveness and quality of market intermediaries by continuing to restructure securities companies and fund management companies subject to the scheme approved by the Prime Minister.