Troubled shipbuilder's default hinders Vietnamese bond sales

Jan 6, 2011, 6:23 GMT

Hanoi - State-owned Vietnamese firms have failed to sell overseas bonds after troubled Vietnam Shipbuilding Group (Vinashin) defaulted on foreign debt repayment, companies and economists said Thursday.

Truong Huy Cuong, a spokesman for the PetroVietnam Group (PVN) said the company halted a 1-billion-dollar overseas bond sale planned for the fourth quarter in 2010.

The company would try and repeat the sale an 'appropriate time' the Viet Nam News quoted PetroVietnam chairman Dinh La Thang as saying.

Vinashin, which is state owned, failed in late December to repay 60 million dollars, the first tranche of a 600-million-dollar loan arranged by Credit Suisse in 2007.

Vietnam National Coal and Mineral Industries Holding Corporation (Vinacomin), has delayed selling bonds worth 500 million dollars overseas.

Economist Nguyen Quang A said he believed state-owned firms had to shelve overseas bond sales because global ratings agencies have downgraded Vietnam's sovereign credit rating.

On December 23, Standard & Poor's downgraded Vietnam's sovereign credit rating to BB- from BB, while the local currency rating dropped to BB from BB+, with a negative outlook.

On December 15, Moody's Investors Service lowered Vietnam's government bond rating to B1 from Ba3, maintaining a negative outlook.

'Vietnamese state-owned firms will meet a lot of difficulties in operations due to lack of capital,' said Nguyen Quang A. However, a positive side effect may be that those firms may now have to tighten spending, he added. 'It means that the effectiveness of using capital will be higher.'

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