Central bank eases control over corporate bond buybacks
HCMC – The State Bank of Vietnam (SBV), the central bank, is providing much-needed support for the illiquid
Previously, according to the State Bank of Vietnam (SBV), in addition to buying back bonds from businesses that they have advised, underwritten or distributed to investors, banks can choose to buy back their bonds if the conditions are met and agreed with the bondholder, or in the previous issuance regulations with a redemption clause.
Rushing to buy back bonds, why?
As reported, Circular No. 03/2023/TT-NHNN stipulates the suspension of the implementation of Clause 11 Article 4 of Circular No. 16/2021/TT-NHNN dated November 10, 2021, stipulating that credit institutions and foreign bank branches buy and sell corporate bonds. This Circular takes effect from April 24, 2023.
Accordingly, from April 24 to December 31, 2023, banks can immediately buy back sold corporate bonds without waiting up to 12 months.
Recognizing the current market movements, the banking group will go in the opposite direction if the real estate group faces many difficulties and struggles to manage cash flow, affecting the ability to pay off due bonds.
Not only operating very well, ensuring the ability to pay bonds due, but many banks have plenty of money to buy more bonds ahead of time.
According to data from the Vietnam Bond Market Association (VBMA) recently announced, nearly VND 25,600 billion is the number of corporate bonds (Corporate bonds) that were bought back by businesses in May 2023, of which the banking group goods accounted for the majority, with more than 17,000 billion dongs, equivalent to 66% of the repurchase volume.
Previously, the corporate bond market report in April 2023 published by Fiin Group showed that the banking group accounted for 61% of the value of bonds bought back in April.
The value of bank bonds bought back by these organizations increased by 5.64 times compared to March and 2.42 times over the same period in 2022. According to Fiin, most of the bond lots bought by banks have a maturity of three years and a remaining maturity of exactly one or two years (2024 or 2025).
As of June 2, 2023, the total value of bonds due in the rest of 2023 is VND 195,090 billion.
Of these, the largest group is still the real estate group, with VND 101,179 billion, accounting for nearly 52%, followed by the banking group, with VND 31,661 billion.
After Tan Hoang Minh, SCB - Van Thinh Phat - TVSI, the move of businesses to buy back bonds before maturity had become a common trend when many previous bond issuances did not meet the issuance conditions. , as well as not complying with the good purpose of using capital according to the original plan. The bond repurchase is explained to avoid legal risks under the government's new regulations.
Which banks have just bought back bonds?
Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) has just completed the pre-maturity buyback of 800 billion dongs of bonds.
It is known that the bonds purchased by Vietinbank have the code CTG1828T2/02, with a par value of 1 billion dong/bond, tenor of 10 years, issuance date 13/6/2018 and maturity date 13/6/ 2028.
In another prospect, Vietinbank also announced the initial offering of bonds for the first phase with a volume of 50 million bonds, of which 20 million bonds CTG2230T2/01, 8-year term and 30 million bonds CTG2232T2/01, term 10 years to the public. This is a non-convertible bond, without warrants, without collateral.
Phase 2 has 15 million bonds CTG2230T2/02 and 25 million bonds CTG2232T2/02. Increase the total number of bonds offered to the public in 2 tranches to 90 million. Bond sale time is from now until July 20 through branches and transaction offices of Vietinbank.
The purpose of issuing and offering bonds to the public of VietinBank is to increase the scale of operating capital, increase tier 2 capital and ensure operational safety ratios by regulations of the State Bank and to implement current lending to the economy (including loans disbursed before and after the time of bond issuance).
Lien Viet Post Commercial Joint Stock Bank (LPBank, HoSE: LPB) announced that on June 29, 2023, the bank would spend VND 1,000 billion to buy back many bonds code LPBH2224004. The bank will also pay 44 million dongs of bond interest up to the early redemption date.
The bond code LPBH2224004 was issued on June 29, 2022, with a term of 3 years with an interest rate of 4.4%.
LPBank also closes on June 21, 2023, will spend VND 1,000 billion to buy back many bonds code LPBH2224002 with a term of 2 years, issued on June 21, 2022, in the domestic market with an interest rate of 4.4%/ year. Besides, the bank will also pay 44 million dongs of bond interest up to the early redemption date.![]()
LPBank also officially issued bonds to the public in 2022, the second phase with a total par value of nearly 3,300 billion VND from now until the end of June. Interest rates are up to 9.6-9.9 %/year.
There are 2 bond codes of 100,000 VND, with 7 years and 10 years terms. Individual investors buy at least 20 million dongs; organizations buy at least 1 billion.
Agribank said that it would buy back 3 billion VND of bonds with code VBACLH2228002 this week.
Bondholders are obliged to sell all their bonds to Agribank, then the bonds will be canceled, and the bond ownership certificates related to the bonds will automatically expire. Other detailed terms and conditions according to Agribank's announcement of bond issuance dated June 23, 2022.
The right strategy
According to observers, buying back issued bonds before maturity is also an appropriate strategy for banks in the current context.
Previously, Vietnam Maritime Commercial Joint Stock Bank (MSB) also announced that it had bought back VND 1,000 billion of bond code MSBL2124003, issued on June 7, 2021, and matured on June 7, 2024.
In 2 days, 5 and 8/6/2023, Viet Capital Bank also spent money to buy back all 250 billion dongs of bonds of two codes BVBL2229002 issued on March 4, 2022, matured March 4, 2029, and code BVBL2229003 issued on March 8, 2022, expired on March 8, 2029.
On June 12, the Board of Directors of Asia Commercial Joint Stock Bank (ACB) issued a resolution on the early redemption of the fourth private placement bond in 2022.
Accordingly, this bank will buy back 4 lots of bonds with codes ACBH2124005, ACBH2124006, ACBH2124011 and ACBH2124012 with a maximum redemption value of VND 10,000 billion. It is known that these are 4 lots of non-convertible bonds, without warrants, without assets and are not secondary debts of ACB.
For lot ACBH2124005: the issue date is June 22, 2021, and the maturity date is June 22, 2023. Lot ACBH2124006: issue date is June 23, 2021, and the maturity date is June 23, 2023. The maximum total par value is 2,500 billion dongs. Each bond has a par value of 1 billion dongs with a term of 3 years.
The remaining two bond lots with codes ACBH2124011 and ACBH2124012 will be paid on July 8, 2023, and July 15, 2023. The bond redemption price equals 100% of the total issued par value.
BIDV Bank has also announced information on the early redemption of bonds worth 1,000 billion VND.
The redeemed bonds have the code BID2128005, with a 1 billion VND/bond par value. The bond has a term of 7 years, the issue date is June 15, 2021, and the maturity date is June 15, 2028.
The State Bank noted that, in the context of the corporate bond market and the real estate market facing many difficulties today, it is necessary to have timely solutions and regulations from many sides to support and contribute to removing difficulties for these markets, thereby contributing to macroeconomic stability.
According to experts, the early redemption of bonds to ensure eligibility for the new issuance plan is a way for banks to restructure bond maturities in a longer direction.
This move helps maintain the capital adequacy ratio at a high level and ensures other factors, such as the ratio of short-term capital used for medium and long-term loans of Vietnamese banks.
