Vietnam sold dollar bonds abroad for the first time in almost five years, seeking to refinance existing obligations after upgrades from Moody’s Investors Service and Fitch Ratings.
Vietnam priced $1 billion of 10-year securities to yield of 4.8 percent, or 2.39 percentage points over similar-maturity U.S. Treasuries, according to data compiled by Bloomberg. Outstanding notes due in 2016 and 2020, which could be switched into the new issue or tendered for cash, rallied yesterday.
Vietnam is looking to reduce the cost of its dollar borrowings and take advantage of its improving credit profile as an end to monetary easing by the Federal Reserve fuels speculation that U.S. interest rates are headed higher. Fitch this week raised Vietnam’s credit rating by one step to BB-, three levels below investment grade, and said government policies have put the Southeast Asian nation’s economy on a more stable footing. Moody’s upgraded the country in July.
“Investors favor dollar-denominated issues,” Rajeev De Mello, who manages $10 billion as head of Asian fixed-income at Schroder Investment Management Ltd. in Singapore, said by phone. “The search for yield is still there. We haven’t seen Vietnam for a while in the market. The macro situation in Vietnam has stabilized. All those factors will be good for this issue.”
The Moody’s upgrade was the rating company’s first for Vietnam since 2005. State-owned Vietnam Shipbuilding Industry Group defaulted on a $600 million internationally syndicated loan in 2010, prompting concern over the stability of the country’s banking system. The government is targeting economic growth of 5.8 percent in 2014 that would be the fastest in three years.
Vietnam’s tender cash offer for existing securities was $1,070 for every $1,000 of 2016 bonds held, and $1,140 per $1,000 of 2020 notes, according to a statement from PR Newswire. Lead arrangers for the refinancing are HSBC Holdings Plc, Deutsche Bank AG and Standard Chartered Plc.