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
Business & Investment Opportunities
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