Currently, due to the complication of the Covid-19 epidemic, the domestic capital mobilization is becoming more and more difficult for Vietnamese enterprises. In addition, borrowing money from credit institutions in Vietnam remains the high interest rates and lending standards. Thus, borrowing bonds to foreign markets, especially healthy markets such as Singapore, is becoming an effective capital mobilization channel for businesses in Vietnam. Although it is a good capital mobilization channel for businesses, but the Singapore market still has potential risks and difficulties when issuing bonds in this market.
As analyzed above, with difficulties in raising capital from the domestic market or borrowing from credit institutions with relatively high interest rates, the issuance of bonds to the international market, especially the Singapore market with an interest rate of only about 6.5%/year can become an effective investment channel to mobilize a cheap and abundant source of capital.
Another benefit for raising capital from international markets is to help businesses have more internal strength and operation ability to expand markets as well as affirm their reputation and brand in the international market and step by step to penetrate fastidious markets.
Another reason why businesses are paying more attention to this form of capital mobilization in recent years is because the USD / VND exchange rate is controlled quite stable, accordingly, dumping level on the official market each year is no more than 2%. This is an important condition for businesses to boldly borrow US dollars from the international market.
Especially for the Singapore market, this is a major financial center of the Region and also is transparent and friendly financial and business environment for foreign businesses. From the perspective of economic cooperation, Singapore and Vietnam have a very close and constantly increasing trade-investment relationship, thus, this is also a favorable condition for businesses. Vietnamese enterprises issue bonds in Singapore.
Despite such advantages, a Vietnamese enterprise wishing to issue bonds to Singapore must meet the conditions specified by Vietnamese law as follows:
According to the above provisions, if enterprises want to issue bonds to the international market, especially in Singapore market, the bond issuance plan needs to be specifically approved by the competent level here, which is the Board of Directors with the issuance of bonds if not provided in the Charter, and the General Meeting of Shareholders with respect to the plan of issuing convertible bonds, the plan to issue bonds with warrants.
Secondly, businesses need to study the regulations on bond issuance of the Singapore market to avoid unfortunate risks due to not understanding the law.
Thirdly, enterprises need to meet the regulations on foreign exchange management and the provisions of the law on management of foreign loans and debt repayment in the Ordinance on Foreign Exchange Management and Decree No. 219/2013/ND-CP on Management of Foreign Loans and Repayments of Enterprises Not Guaranteed by the Government.
Fourthly, depending on the specific activities and industries of the enterprise, it must also meet the financial safety ratio and the safety ratio in operation according to the provisions of specialized law. Taking the banking industry is a typical example when it is necessary to meet the safety ratios in banking operations as stipulated in Circular No. 22/2019/TT-NHNN Ensuring Safety In Operations Of Banks, Foreign Bank Branches.
Fifthly, in the case of issuing convertible bonds or warrant-linked bonds, enterprises should pay attention to whether the foreign ownership ratio is met in accordance with Vietnamese laws on some conditional business lines for foreign investors or not. And for this type of bond, the issuance of convertible bonds must be at least six months apart.
Having specific legal regulations helps Vietnamese businesses to have clearer directions and plans to issue bonds in the market. Currently, many businesses have boldly issued bonds abroad and Singapore market has many large enterprises and banks that have implemented this form of capital mobilization such as Novaland, VPBank, Vietcombank or recently, Vingroup Group Joint Stock Company has just published information about the issuance of international bonds to have the right to choose in order to receive shares with a total value of 500 million USD in Singapore. This helps businesses not only have an abundant capital source, but also helps big businesses assert their brands and names beyond the level of Vietnam.
Although the Singapore market is a transparent and business-friendly market for Vietnamese enterprises, it means that Singapore’s stock market is a reputable market in the world, leading to strict requirements and conditions. Thus, listing on the Stock Exchange in Singapore is highly sophisticated for foreign businesses.
Besides, as one of the conditions specified in Vietnamese law, not only Vietnamese enterprises must understand the local regulations and procedures, but they also have to understand the legal regulations or even bonding business practices in Singapore. And when they do not understand the legal requirements, businesses do not have the necessary preparation to achieve their international listing goal for Vietnamese enterprises.
Due to this disadvantage, Vietnamese businesses have encountered many difficulties in the Singapore market.
The first difficulty is convincing the Singapore market, whether Vietnam enterprises have an ability to make Singaporean investors, partners have enough confidence to buy bonds of Vietnamese company that they do not understand. In particular, the trusting rate of Vietnamese businesses is not high, making this capital mobilization definitely not easy.
Also stemming from the lack of thorough and complete understanding of the Singapore market can cause Vietnamese businesses to borrow at very high interest rates, causing many difficulties for enterprises in case of payment.
In addition to these difficulties, Vietnamese enterprises may face risks of legal issues, including risks related to foreign exchange management. In addition, for convertible bonds, businesses also have to pay attention to industries that limit the proportion of foreign investors. This is because when Vietnamese big companies normally register many different industries but not all these industries accept foreign persons to invest. That makes these bonds impossible to convert into company shares.
Another risk is that when too many bonds are issued, Singapore partners can take advantage of this to take over the business. This is also something that businesses need to pay attention to.
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