Morgan Stanley-Backed PetroVietnam Unit Eyes Bonds on Rates

PetroVietnam Finance Joint-Stock Co., which makes loans and helps arrange investments in local companies, plans to raise as much as 8 trillion dong ($384 million) from bond sales this year as high interest rates make bank loans more expensive.

The company is seeking approval from the country’s central bank to sell 5 trillion dong of three- to five-year notes as early as this quarter, chief executive officer Nguyen Thien Bao said in an interview in Hanoi April 4. It also plans to sell 3 trillion dong of convertible bonds this year, he said. The bonds’ coupons will be determined by market conditions, Bao said.

PetroVietnam Finance, backed by Morgan Stanley, joins Joint-Stock Bank for Foreign Trade of Vietnam, or Vietcombank, Vincom Joint-Stock Co. and Vietnam Joint Stock Commercial Bank for Industry and Trade, known as VietinBank, in seeking to raise money by accessing debt capital markets as higher interest rates make borrowing from domestic banks more costly.

“Bank loans are costly due to higher rates and banks are cautious, lending only to long-standing customers,” said Alan Pham, the chief economist at VinaCapital Investment Management Ltd. “Issuing new shares dilutes the value for existing shareholders. So out of the three sources of funding, the bond market is the best choice.”

PetroVietnam Finance rose for a fourth day, gaining 1.5 percent to 13,400 dong, the highest close since March 26. It has surged 86 percent this year, compared with a 27 percent jump in the benchmark VN Index of the Ho Chi Minh City Stock Exchange.

High Borrowing Costs

High borrowing costs and “limited” access to credit led to a 6 percent increase in the number of companies closing in the first quarter from a year earlier, Vu Duc Dam, chairman of the Government Office, said April 1. Banks in Vietnam are also hobbled by soured loans, which the government is trying to address by buying bad-debt from commercial banks to strengthen their balance sheets.

The government cut its credit growth target to as low as 15 percent this year from less than 20 percent in 2011. Vietnam’s loans expanded 13 percent last year, according to the central bank. Policy makers raised the refinancing rate to 15 percent from 9 percent at the start of last year, before lowering it to 14 percent on March 12.

PetroVietnam Finance, a unit of Vietnam Oil & Gas Group, expects pretax profit to rise 20 percent to 660 billion dong this year, Bao said at the company’s headquarters in Hanoi. Revenue is forecast to fall to 6.9 trillion dong from 8 trillion dong last year, he said. Morgan Stanley holds a 10 percent stake in the company, according to PetroVietnam Finance’s website.

Vietcombank, the country’s largest lender by market value, said last month it plans to sell as much as $1 billion of 10-year bonds internationally as early as 2012. VietinBank also said it will offer as much as $2 billion of notes this year.

Refrigeration Electrical Engineering Corp. said in March it will sell 557.8 billion dong of convertible bonds in the second quarter to its strategic partners, while real estate developer Vincom JSC sold $185 million of convertible bonds in March.

Singapore Listing

PetroVietnam Finance will cancel its Singapore listing plan because the company currently doesn’t “see any benefits” from listing overseas, Bao said. The company had initially planned to list its shares on the Singapore Exchange in the second quarter of 2010.

The company is also advising investors from Japan and Korea on purchasing stakes in Vietnamese companies and expects to help manage two to three deals with an average value of about $100 million to $200 million each, Bao said.

— With assistance by Giang Nguyen

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