Vinashin seeks loan deferral to avoid default

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Troubled state-owned shipbuilder Vinashin has asked creditors for more time, saying it is impossible for it to settle the first US$60 million of its debt by December 20.

The $60 million amount is part of the $600 million debt incurred through bonds not guaranteed by the government issued to international entities in 2007. The money is supposed to be paid in 10 installments, due at six-month intervals.

"We need the support of all the creditors, local and overseas. [...]. We will not evade the debt, but we need more time," the Vietnam Economic Forum website run by the Ministry of Information and Communications quoted Vinashin Chairman Nguyen Ngoc Su as saying on Tuesday (December 14).

Su told Tuoi Tre on December 10 that his company had met with the Credit Suisse Group, representing the lenders, to ask for deferral of the loan until December 2011.

Su said Credit Suisse supports Vinashin "in principle" but he was not sure about Credit Suisse's influence on creditors, and was waiting for their direct decision.

Apart from Credit Suisse, the debt-laden company's international creditors include Britain's Standard Chartered Bank PLC, Bank of Kaohsiung, Bank of Taiwan and the National Bank of Kuwait SAK.

"If Vinashin is cornered to default or goes bust, the lenders of the $600 million will not collect a penny," Su told the Vietnam Economic Forum. "The contracts do not say what the creditors will get in case Vinashin collapses. Both sides will lose. That's the reality. There are no alternatives.

"In general, I think that the lenders should not use strong measures against Vinashin in a difficult situation like this; a debt-stricken borrower should not be cornered into a more difficult place."

Su said Vinashin needs more time to restructure its 216 units, and finish building ships so that the company can pay its debts.

The state-owned group has hired accounting and consultancy firm KPMG to advise on the restructuring of its $600 million debt.

In fact, the beleaguered shipbuilding firm had racked up debts of about VND86 trillion ($4.4 billion) as of June, or about 4.5 percent of the country's gross domestic product last year, the government said last month.

The government has approved a plan to restructure the shipbuilder that will retain focus on its core business.

Vinashin's debts will fall to VND53 trillion under the plan, which ministries will work on through 2013, the government said in a November 19 statement on its website.

Ratings agency Standard & Poor's said Monday that Vinashin's potential failure to make debt payments is likely to undermine the credit quality and profitability of Vietnam's banks.

"Vinashin's woes highlight the lack of transparency, weak accountability and poor corporate governance in Vietnam, which is still in the early stages of transitioning from a centrally planned to a market-based economy," S&P credit analyst Ivan Tan said in the statement.

AP quoted senior economist Le Dang Doanh as saying on Tuesday that Vinashin should try to make some payment and then ask creditors for an extension on the remaining debt, instead of trying to take a hard-handed approach and pressurize the creditors into giving the company more time.

"The whole country will have to pay a price for Vinashin's problems in terms of credit quality," he said. "The country has already paid the price. They (the ratings companies) have downgraded, and they will make further downgrades."

Moody's Investors Service cut Vietnam's credit rating on Wednesday, citing an increase in financial stress that is partly due to the near collapse of state-owned shipbuilder Vinashin.

The ratings agency said it lowered the Vietnam government's foreign currency bond rating to B1 from Ba3 and kept the outlook negative, meaning the rating could be cut again.

A lower credit rating increases the cost of borrowing and can make it more difficult for governments to raise money from international financial markets. Vietnam has about $2.3 billion of foreign currency bonds on issue.

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