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Vinacomin Facing Downgrade on State Support Concern

Vietnam’s state-owned mining company was put on review for a possible downgrade by Moody’s Investors Service as the Southeast Asian nation’s biggest shipbuilder struggles to make payments on a foreign currency loan.

Vietnam National Coal-Mineral Industries Group, known as Vinacomin, may have its provisional Ba3 rating withdrawn, Moody’s said today. The review was prompted by the potential restructuring of Vietnam Shipbuilding Industry Group, or Vinashin, and the implications a default might have on government support for other state-owned enterprises, it said in an e-mailed report.

Vinacomin Deputy Chief Executive Officer Nguyen Van Hai declined to comment on the review.

State-owned Vietnam Shipbuilding Industry almost collapsed with debts of 86 trillion dong ($4.4 billion) as of June, Vietnam’s government said Aug. 4, before a World Bank report showed the Hanoi-based company falsified financial reports. The company may delay a $60 million principal payment due Dec. 20 on a $600 million loan amid questions over the extent of government backing, Moody’s analyst Karolyn Seet wrote on Nov. 19.

“Moody’s expectations of such high support for Vinacomin have been tempered by the developments at Vinashin,” Alan Greene, a Moody’s senior credit officer, said today. “The review will need to consider whether the situation at Vinashin is company specific, or reflective of a more commercial approach to the control and support of the state-owned businesses.”

Vinashin has diversified beyond shipbuilding and needs to narrow its focus, Deputy Prime Minister Nguyen Sinh Hung has said. Long-term delays in debt repayment could force international banks to restructure their loans to the company, or write off their debt and damage their capital, Seet said in her report last month.

Vinacomin postponed a planned sale of as much as $500 million of 10-year bonds, a person familiar with the matter said Nov. 23. Moody’s had assigned a provisional bond rating of Ba3, its third-highest junk grade, before that planned sale.

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