Sep 13, 2012

Vietnam - Chased by creditors, big guys have to bargain away their assets

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VietNamNet Bridge – A new wave of selling assets to get money for debt payment has kicked off. This is the last resort for businesses, which cannot think of any other ways to pay debts and maintain production.

The last resort

A lot of enterprises have to “pay a heavy price” for their overhasty plan to scale up business. Despite the sky high interest rates, they have been trying to borrow money to kick off a lot of new investment projects.

Since the investment projects failed in the context of the weak demand in the economic downturn, the investors have to sell their assets cheaply to get money to pay off debts.

At this moment, the owners of unprofitable businesses do not have the time to “make up” their finance reports any more, showing their assets in their true status.

The finance reports of shipping firms have shown the poor business performance of the industry. Vitranschart JSC, for example, has reported the loss of 37 billion dong. Vosco has reported the loss of 104 billion dong, and Vinaship 35 billion dong. Some of the shipping firms have sold their ships, liquidated old assets to survive, and many of them are considering delisting from the bourse. Viconship Saigon is an example.

The businesses owing money right and left have also been trying to sell their assets, or give products to creditors as payment of debts.

A big guy in the coffee industry – Thai Hoa Group – is also considering selling a part of its assets. To date, Thai Hoa has sold most of the Thai Hoa Dien Bien project and 51 percent of the coffee project in Laos to the Maritime Bank as payment of a debt.

The group is also considering selling some other projects, mostly to the banks – creditors, in order to ease the accounts payable.

The 1800 billion dong it owed to commercial banks and farmers pushed Bianfishco, a seafood processing and export company, to the verge of bankruptcy. The company has been trying to reduce the debts by selling valuable assets, including factories and real estate projects. However, the situation has not been improved considerably.

Experts believe that the decision by businesses to sell their assets is considered a momentum for finance balancing. It is an understandable move, because at this moment, cash proves to be more important than profit. Once the profit is not high enough to pay bank loan interests, or profit remains on… paper because of the slow sales, it would be better to hold cash.

The opportunity to swallow other businesses

Experts believe that it would be better to sell assets to pay debts soon, if they really have to do that. The current economic downturn is expected to last for a longer period of time, which may lead to the asset depreciation. Therefore, it would be a foolish decision that businesses try to hold out now and then sell assets later, when the prices go down.

The potential buyers – the main subjects the sellers should target – are the businesses with powerful finance capability and the banks, who are the creditors of the debtors.

However, experts have warned that the number of powerful businesses to buy assets is really very modest.

Nguyen Van Duc, Deputy Chair of the HCM City Real Estate Association, said in the deals, the sellers-creditors are always on a disadvantage. Bankers-creditors now only accept to buy assets at low prices, which are just equal to 50 percent of the actual values.

Nam Phong


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