Nguyen Van Nen (standing), Minister and Chairman of the Government Office, speaks at a press briefing in Hanoi on August 28, 2014. Photo credit: chinhphu.vn
Vietnam is considering issuing US$1 billion in new bonds to fund its debt exchange plan, thereby allowing the nation to cut interest payments.
“This bond issuance aims at swapping [foreign] debt,” Nguyen Van Nen, Minister and Chairman of the Government Office, said at a press briefing in Hanoi last week.
Nen said the yield of $1 billion of existing international bonds --maturing at 6.95 percent a year -- is high and the government now has a chance to issue bonds at lower interest rates.
He provided no further details.
Deputy Finance Minister Tran Van Hieu, who also attended the briefing, declined to reveal where the bonds would be sold or at what interest rate.
If the plan comes to fruition, it will be the third time the Vietnamese government has issued international bonds during the last nine years.
Vietnam issued bonds for the first time in 2005. At that time, the country raised $750 million on the New York Stock Exchange by selling 10-year bonds at a coupon rate of 7.125 percent.
The government gave the proceeds to state shipbuilder Vinashin, which ran up more than $4 billion in debts in 2010 through corruption and incompetence.
Vinashin, now known as Shipbuilding Industry Corp., has been involved in a complex government restructuring process ever since the arrest and conviction of its former leadership.
The country’s second international bond issuance raised $1 billion on the Singapore Exchange in 2010. The 10-year bonds were issued with a coupon of 6.75 percent and entered the market with a yield of 6.95 percent.
Those proceeds were granted to a number of state-owned companies including PetroVietnam and Electricity of Vietnam.
In January, Fitch revised Vietnam’s long-term foreign and local currency issuer default ratings outlook to "positive" from "stable," due to an improvement in macroeconomic stability.
The rating agency gave a B+ rating both to Vietnam’s long-term foreign and local currency IDR and its senior non-secured foreign and local-currency bonds.