Vietnamese firms turn to expensive offshore loans amid credit crunch

With banks offering limited credit and bond issuance a tough proposition, several Vietnamese companies are trying to access foreign loans that have higher interest rates than domestic ones.

Vietnam’s corporate bond market saw only one issuance in October and businesses have been buying back their bonds before maturity.

The credit crunch has stemmed from the central bank’s efforts to control inflation.

Some Vietnamese companies have taken offshore loans with interest rates of 12-13% per year, about 4-5 percentage points higher than the rates domestic banks are offering for savings deposits, according to a new report by FiinGroup, a Vietnamese provider of financial data and credit rating.

The most recent 10 offshore loans secured by Vietnamese companies total $1.915 billion. The borrowers are: Masan Group ($600 million), VPBank ($500 million), SeABank ($200 million), Viet Capital Securities ($105 million), VNDirect Securities ($75 million), consumer finance firm F88 ($60 million), EV maker VinFast ($135 million), agri-business Loc Troi ($100 million), ride-hailing services provider Be Group ($100 million), and property developer Novaland ($40 million).

Offshore capital is even more expensive given guarantee costs and transaction fees, not to mention exchange rate risks, the FiinGroup report said.

By the end of October, the value of outstanding real estate bonds was VND445 trillion ($17.91 billion), accounting for nearly 34% of the total value of private placements and nearly 50% of the total value of bonds.

Real estate bonds maturing by the year's end amount only to VND21.85 trillion ($880 million), but the value of those that will mature over the next two years is very high: more than VND119 trillion ($4.79 billion) in 2023 and more than VND111 trillion ($4.47 billion) in 2024.

Therefore, debt restructuring plans are being actively implemented, the FiinGroup report said.

A positive sign in domestic companies’ securing offshore loans is capital suppliers have some trust in the borrowers and their credit records, according to FiinGroup.

Corporate bonds used to be the preferred source of capital for many businesses, especially real estate developers. But the tightening of the corporate bond market following the arrests of Tan Hoang Minh and Van Thinh Phat leaders for their bond issuance violations, and the promulgation of Decree No. 65 with more stringent requirements on private placement of corporate bonds have made this avenue virtually closed.