VietinBank bond sale wins regulatory approval

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Vietnam Joint Stock Commercial Bank for Industry & Trade (CTG), known as VietinBank, has received approval from the country's central bank for its planned $500 million international bond sale, Deputy General Director Le Duc Tho said in a telephone interview.

"Our plan is to sell the bonds in the fourth quarter, but in reality we will be flexible," Tho said Tuesday. "We will choose the most suitable and most favorable timing for the bond sale, based on market conditions."

The sale would be first of dollar-denominated notes for the bank and the third sale of US dollar bonds by a Vietnamese corporate borrower this year, according to data compiled by Bloomberg. VietinBank is now seeking approval for the sale from the finance ministry, Tho said.

"Given the timing, I am not sure if VietinBank can make it in the fourth quarter," said Nguyen Tan Thang, head of fixed- income research at Ho Chi Minh City Securities Corp. (HCM), Vietnam's second-largest brokerage. "It's also not a good time to sell bonds in the international market because they may get a very expensive yield," he said.

Credit-default swap contracts

Thang said the cost of protecting Vietnam's sovereign debt against non-payment has surged over the past month on concern that soaring inflation will compound weaknesses in the banking system.

Credit-default swap contracts on Vietnam have risen 34.1 basis points this month to close at 425 basis points yesterday, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Standard & Poor's this month lifted its Banking Industry Country Risk Assessment on Vietnam one level to the highest risk group. Vietnam's banking system is weak and non-performing loans are "heavily understated" in official data, Fitch Ratings said in an Aug. 8 note.

Shares of VietinBank rose 4.93 percent to 23,400 dong at 11 a.m. in Hanoi, the biggest gain since June 2. Vietnam's benchmark Vietnam Stock Index (VNINDEX) rose 1.8 percent to 388.57.

Vietnam's inflation rate was 21.59 percent in October, easing from 22.42 percent in September. The pace is the fastest in a basket of 17 Asia-Pacific economies tracked by Bloomberg.

Moody's Investors Service, S&P and Fitch Ratings all cut Vietnam's sovereign debt rating in 2010.

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