Vinashin loan woes may raise borrowing costs for Vietnam's state companies

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Vietnam National Coal-Mineral Industries Group and other state companies in the Southeast Asian nation may have to pay more to borrow as the near-bankrupt national shipbuilder struggles to repay a foreign-currency loan.

Vietnam National Coal may have its rating downgraded as a debt restructuring at Vietnam Shipbuilding Industry Group, known as Vinashin, spurs a reassessment of government support for state-owned enterprises, Moody's Investors Service said on Dec. 1. Vinashin asked lenders for a delay on a $60 million loan repayment due Dec. 20, the Wall Street Journal reported today, citing a letter from Chief Executive Officer Truong Van Tuyen.

"It's certainly not good for Vietnam and will mean the cost of borrowing will be expensive," Jonathan Pincus, an economist at the Harvard Kennedy School in Ho Chi Minh City, said in a phone interview. "There's a lot of capital that wants to come to Asia and Vietnam may miss out on that."

Vinashin almost collapsed with debts of VND86 trillion ($4.4 billion) as of June, and the company needs to refine its focus after diversifying out of marine services, Deputy Prime Minister Nguyen Sinh Hung has said. Delays in repayment of Vinashin's debts may damage the capital of some international banks, according to Moody's, as state-owned Electricity of Vietnam seeks banks for a $1 billion overseas bond sale to finance new power projects.

Vietnam's dollar bonds lost 2.35 percent in November, their worst month since they declined 4.85 percent in November 2009, according to HSBC Holdings Plc index data. The nation's $1 billion of bonds due January 2020 fell to 108.75 cents on the dollar yesterday, the lowest in 10 weeks, according to BNP Paribas SA prices.

Sale delay

Vietnam National Coal, known as Vinacomin, postponed a sale of as much as $500 million in 10-year bonds due to poor market conditions, a person familiar with the matter said on Nov. 23. The company may have its provisional Ba3 rating withdrawn, according to Moody's.

Foreigners may "rethink before investing in Vietnam," Francois Chavasseau, head of fixed-income research at Sacombank Securities Joint-Stock Co., said in a phone interview from Ho Chi Minh City. "There is definitely an impact from Vinashin."

A World Bank report stated Vinashin falsified financial reports before Moody's said on Nov. 29 that the shipbuilder may delay a $60 million principal payment on a $600 million, seven- year loan organized by Credit Suisse Group AG in December 2008.

Vinashin's near collapse indicates a "systemic failure" in regulators' supervision of state-owned companies, according to the Asian Development Bank.

"˜Systemic failure'

Vinacomin Deputy Chief Executive Officer Nguyen Van Hai declined to comment. Vinashin CEO Tuyen wasn't immediately available to comment when contacted by telephone by Bloomberg News Friday. Phung Dinh Thuc, chief executive officer of state-run Vietnam Oil and Gas Group, also wasn't immediately available to comment when called Friday.

"This may get people to re-think their dealings with emerging markets as a whole," Alan Greene, a Moody's senior credit officer, said in a phone interview from Singapore. "These sorts of risks are always laid out in the front of offering circulars, but investors always think "˜it won't happen this time'.

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