Businesses prefer issuing corporate bonds to borrowing from banks


VietNamNet Bridge – With reasonable interest rates, corporate bonds have become more attractive to businesses than bank loans.

 The Saigon Securities Incorporated (SSI) on August 4 announced it has successfully issued VND200 billion worth of 2-year unconvertible bonds with the interest rate of 7 percent per annum for the first 12 months. 

The interest rates for the following months will be adjusted once every three months, calculated by the average dong 12-month term deposit interest rates applied by Vietcombank, Vietinbank, BIDV and VIB plus 1.2 percent. 

This was the first bond issuance campaign launched by SSI in 2016 after it successfully issued VND800 billion worth of bonds in 2015. The capital to be mobilized will be used to enlarge the operation scale.

Techcombank Securities has announced the plan to issue TCBond Novaland in August. The 1-year bonds have the investment interest rate of 8 percent per annum and will be listed on the HCMC Stock Exchange. The product has been advertised as suitable to all investors and everyone can make investments with the minimum capital of VND200 million.

Prior to that, the State Bank approved Vietcombank’s plan to issue VND8 trillion worth of bonds in Vietnam dong in 2016. The bond interest rates will be determined by Vietcombank, which come in line with the market interest rates and the current regulations.

The investors to buy Vietcombank’s bonds on the primary market won’t include credit institutions, foreign bank branches and banks’ subsidiaries. 

A senior executive of a finance investment firm confirmed that Vietcombank has contacted it and offered to the bonds. “We still need to consider the interest rates and we may buy the bonds,” he said.

The board of directors of Khang Dien Housing has decided to issue VND570 billion worth of corporate bonds with the face value of VND1 billion.

According to SSI, there are many factors that helped the company issue bonds at such good interest rates. First, the time was reasonable to issue bonds: the liquidity was plentiful and the credit growth rate was low, which allowed it to mobilize idle capital easily.

Second, the capital mobilization scale was not too big, which allowed it to negotiate for good interest rates, while the short term of the bonds could more easily satisfy investors. 

“The bond interest rate is really attractive and is much cheaper than bank loan interest rates,” commented Nguyen Duy Hung, president of SSI.

In the first six months of the year, the credit of the whole banking system grew by 8.16 percent, while the deposit increased more sharply, by 8.23 percent. 

With plentiful liquidity, the overnight interest rate decreased to 0.56 percent per annum on the interbank market, the lowest in history.


Photo: CBR Investment AG