Saigon Asset Management Corp., run by a former managing director of Vietnam's biggest fund manager, plans to start the country's first distressed-assets fund as a credit crunch squeezes small to medium-sized firms.
Saigon Asset Management will team up with the investment unit of Vietnam Joint-Stock Commercial Bank for Industry & Trade, or VietinBank, the nation's second-biggest listed bank, for the fund. They plan to raise $150 million to invest in companies that have non-performing loans with the bank, said Louis Nguyen, chairman and chief executive of the fund manager.
The fund is aiming to capitalize on Vietnam's credit crunch as tightened policy to combat Asia's fastest inflation pushed up lending rates and hampered the ability of companies to get or refinance loans. Policy makers have pushed the credit growth target this year to below 20 percent from 23 percent to damp inflation, which accelerated for the 11th straight month in July.
"This is the perfect time to strike," Nguyen, who founded Saigon Asset Management four years ago and manages two funds totaling $125 million, said in an interview. "We're looking for firms that have been performing well and are on a growth path but are in a tough spot because of the credit crunch."
The State Bank of Vietnam's deputy governor, Nguyen Van Binh, said last month the government aims to keep bad debt at commercial banks to less than 5 percent. Christian de Guzman, Singapore-based vice-president at Moody's Investors Service, estimates that figure is "far north" of 5 percent and could possibly be in the "double digits" if international accounting standards rather than Vietnamese methods are applied.
"We do expect some asset deterioration to continue through the rest of the year," de Guzman said. "There will be an ample supply of assets coming down the line."
The fund also aims to take advantage of lower valuations after the benchmark VN Index slid 16 percent this year, Asia's worst performer. The measure trades at 9.6 times estimated earnings, the lowest in the region after Pakistan's Karachi Stock Exchange 100 Index.
The fund, which will be jointly operated by Nguyen's group and VietinBank Capital, the lender's investment unit, will glean through the bank's non-performing loans to invest in real estate companies and non-public businesses in the consumer and financial services sectors, Nguyen said.
"It's very difficult for foreign investors to find good deal flows in Vietnam, so linking up with a local bank is critical," said Nguyen, who was a managing director at VinaCapital Investment Management Ltd., the nation's biggest fund manager. He left VinaCapital in 2007.
Saigon Asset Management is planning to meet investors in Asia and Europe in September to raise about $100 million, while VietinBank Capital will raise the rest within the country, the companies said.
Lending rates in Vietnam now exceed 20 percent, making it difficult for many small-to-medium sized businesses to refinance loans or get capital for operations, said Nguyen Anh Tuan, VietinBank Capital's general director.
"A large number of non-performing loans are not that bad," said Tuan. "They're still receiving orders from overseas, their goods are selling well and they have a growing customer base. They're in trouble now mostly because the interest rates in Vietnam are too high."
The State Bank of Vietnam on July 24 said it would continue managing credit for non-production businesses and reiterated that banks must restrict lending for stock investments and real estate to 16 percent by year-end.