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Vinashin May ‘Jeopardize’ Vietnam Debt, Moody’s Says

Vietnam and its state-backed companies will face greater difficulties borrowing money after reports Vietnam Shipbuilding Industry Group defaulted on a loan, according to Moody’s Investors Service.

Vinashin, as the shipbuilder is known, failed to meet an extended deadline to make a $60 million loan payment to foreign creditors yesterday, the Financial Times reported, citing unidentified people familiar with the situation. Vinashin Chairman Nguyen Ngoc Su declined to comment when contacted on his cell phone by Bloomberg News today.

“The implication of the Vinashin default is that it might not be company-specific after all,” Alan Greene, a Moody’s senior credit officer, said in a phone interview from Singapore. “The question now is why, seemingly for the sake of $60 million, has Vietnam jeopardized access to credit markets?”

Vietnam’s debt rating was cut by Standard & Poor’s yesterday by one rung to BB-, three levels below investment-grade, putting it on par with Bangladesh and Mongolia. The downgrade followed a similar move by Moody’s earlier this month, adding to pressure on a government striving to tackle inflation of 11.75 percent, a 22-month high, and a weakening currency.

Vinashin, which the government says had debt of about 86 trillion dong ($4.4 billion) as of June, asked lenders for a one-year delay on repayments on a $600 million loan, organized by Credit Suisse Group AG in 2007, Chairman Su was quoted by the Vietnam News Agency as saying Dec. 20. The first payment of $60 million was due the same day.


State-owned miner Vietnam National Coal-Mineral Industries Group, or Vinacomin, was downgraded to B2 from Ba3 by Moody’s on Dec. 15, and its outlook was lowered to negative from stable by Standard & Poor’s yesterday.

Vinacomin may be downgraded again if Moody’s takes further rating action on the sovereign, Greene said. The Hanoi-based-coal miner postponed a planned sale of as much as $500 million of 10-year bonds, a person familiar with the matter said last month.

Vinashin’s debt issues may be linked to politics before the Communist Party Congress next month, Hanoi-based Tony Foster, managing partner at law firm Freshfields Bruckhaus Deringer, said in a telephone interview. “It’s not an economic decision, it’s something political going on,” Foster said.

Prime Minister Nguyen Tan Dung faced calls for a confidence vote at a National Assembly meeting last month as lawmakers demanded accountability for Vinashin’s deteriorating finances.

Credit Swaps

The cost to insure Vietnam’s debt against default soared to the highest level in almost 18 months on Dec. 21 after closing at 300 basis points, the most since July 15, 2009, CMA prices show. Credit-default swaps were little changed at 305 basis points as of 11:05 a.m. today in Singapore, according to Royal Bank of Scotland Group Plc prices. A basis point is 0.01 percentage point.

A lender steering committee, including representatives from Credit Suisse, Standard Chartered Plc and hedge fund Elliott Advisors Ltd., was set up to negotiate with Vinashin, a person with direct knowledge of the matter said. KPMG LLP confirmed earlier this month it had been hired as advisers by Vinashin.

Vinashin Chairman Su and Chief Executive Truong Van Tuyen also didn’t respond to faxed questions about the payment. Officials at the Ministry of Finance weren’t available for comment.

Credit Suisse’s Hong Kong-based spokesman Adam Harper declined to comment, as did Standard Chartered’s Hong Kong-based spokeswoman Joyce Li, citing client confidentiality.

Pledged foreign investment in Vietnam totaled $18.6 billion in 2010, “slightly lower” than expected, according to a statement today on the Vietnam government’s website, which cited figures from the Foreign Investment Agency.

“To allow this deadline to come and go would be a blow to Dung, definitely,” Carlyle A. Thayer, professor of politics at the Australian Defence Force Academy in Canberra, said in a telephone interview.

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