Vietnam asks for suspension of shipbuilder's debt repayments

Aug 27, 2010, 6:07 GMT

Hanoi - The Vietnamese government asked local commercial banks to allow the troubled state-owned shipbuilding firm Vietnam Shipbuilding Industry Group (Vinashin) to suspend payments on its debts, state media reported Friday.

Deputy Prime Minister Nguyen Sinh Hung told the State Bank of Vietnam to order the suspension until the end of 2011, the Tuoi Tre newspaper said.

Hung, who heads a committee responsible for restructuring Vinashin, also asked the Ministry of Finance and the State Bank of Vietnam to negotiate with international creditors over Vinashin's debts. The company issued 187 million dollars of bonds and took on 600 million dollars in loans in 2007.

Hung has asked the Ministry of Finance to submit plans to grant the company more chartered capital. When Vinashin was restructured in 2006, the government approved a chartered capital of 14.66 trillion dong (775 million dollars).

It is not clear how much chartered capital the government ever granted Vinashin. At a press conference on August 4, Hung said the government had granted the company more than 100 billion dong. This figure conflicted with reports in the local media, which put the figure far higher.

Vinashin's own website stated that the government granted its subsidiary Ha Long Shipbuilding Industry Co 200 billion dong of chartered capital.

Vinashin got into financial trouble when it diversified beyond its core business and the global recession hit its revenue, leaving it unable to keep up with its debt repayments, the government said.

As of the end of June, Vinashin had total assets worth 90 trillion dong and debts in different currencies totalling 4.6 billion dollars, the government said.

Police last month arrested Vinashin chairman Pham Thanh Binh, 57, for alleged mismanagement that led the company to the brink of bankruptcy, causing salary cuts for more than 70,000 employees and the dismissal of 5,000 others.

Several economists have criticized the government for offering Vinashin unjustified state support, including a 750-million-dollar state loan in 2005 financed by a bond sale.