Near-bankrupt Vinashin may owe 3% of Vietnamese banks’ loans

Vietnam Shipbuilding Industry Group, the near-bankrupt ship maker, may account for as much as 3 percent of some Vietnamese banks’ loan portfolios, putting them at risk for restructuring, Moody’s Investors Service said.

Vietnam Shipbuilding Industry Group, the near-bankrupt ship maker, may account for as much as 3 percent of some Vietnamese banks’ loan portfolios, putting them at risk for restructuring, Moody’s Investors Service said.

State-owned Vietnam Shipbuilding, also known as Vinashin, said Nov. 19 it may delay a $60 million principal payment on a $600 million loan, according to Karolyn Seet, a Singapore-based financial institutions analyst at Moody’s, who wrote she now questions the extent of government backing for the company.

Long-term delays in debt repayment and a lack of government support could force banks to restructure loans to Vinashin or write off their debt and damage their capital, she said in a note today. The company had accumulated total debt of about 86 trillion dong ($4.41 billion) as of June, the government said in August.

“Before this, we thought the government would be willing to step in and bail out any bank in time of default,” she said in a telephone interview. “With this case coming along we are not sure if the support is as high as we originally thought.”

Vinashin has 16.2 trillion dong of bonds and loans maturing through 2017, according to data compiled by Bloomberg. The yield on its 9 percent dong-denominated notes due in April 2017 rose to 21.16 percent today, the highest in at least a year, according to Deutsche Bank Vietnam prices.

For some Vietnamese lenders, especially the state-owned commercial banks, Vinashin is their largest debt concentration, Seet wrote. Most of those loans have not been written off and are still categorized as performing or “special-mention loans.”

Management Ousted

Prime Minister Nguyen Tan Dung replaced the company’s top management and began a probe of its operations. The government also announced a restructuring of the group.

Vinashin will do the restructuring on its own, Chief Executive Officer Nguyen Ngoc Su said by telephone today, giving no timeframe. He denied earlier reports that KPMG is being hired as an adviser on the restructuring.

Vinashin used resources obtained from government guarantees to invest in non-core activities, falsified financial reports and is on the verge of default, the World Bank said in October.

The company will now focus on shipbuilding and repair and other related businesses, Moody’s said.

“The Vinashin episode shows that timely government support to both the corporate as well as banking sectors cannot be reliably assumed,” Seet wrote. “More importantly, the episode raises further questions about the risk of further credit losses in loans to Vietnam’s state-owned enterprise sector.”

Vietnam’s banking industry may have an overall loan exposure to state-owned companies of as much as 40 percent, according to Moody’s.

(Reporters: Jason Folkmanis in Ho Chi Minh City With assistance from Uyen Nguyen in Hanoi. -- Editors: James Gunsalus, Russell Ward.)

From BusinessWeek