Many Vietnamese businesses have boosted foreign fundraising to cope with their capital shortage amid the country's tightened monetary policy.

In the context of tightened and expensive domestic capital sources, mobilising capital from abroad is an opportunity for local reputable enterprises and banks, and many of them have recently announced huge loan agreements with foreign financial institutions.

A recent report from financial data service provider FiinGroup showed the channel for raising capital through domestic bonds is gloomy, but many domestic enterprises still succeeded in mobilising international loans. Specifically, ten deals announced recently had a total value of nearly US$1.92 billion.

Among the deals, VPBank signed a loan agreement worth $500 million on November 11 with five major financial institutions – Asian Development Bank (ADB), Sumitomo Mitsui Banking Corporation (SMBC), Japan International Cooperation Agency (JICA), Australia and New Zealand Banking Group Limited (ANZ), and Maybank Securities Pte. Ltd., a member of the Maybank Investment Banking Group.

CEO of VPBank Nguyen Duc Vinh said the capital sources will help VPBank promote credit programmes for small- and medium-sized enterprises in Viet Nam, businesses owned by women, and businesses in the fields of healthcare, education, hygiene, traffic, and building social housing, giving them access to relatively low-cost capital for development.

SeABank on November 12 said it and the US International Development Finance Corporation (DFC) had signed a loan agreement worth $200 million. With support from DFC, SeABank will improve its financial capacity to better implement the proposed projects, focus on the credit gap and solve the gap between the financial needs of the market and the existing source of money in the economy.

Previously, VIB completed the disbursement of a $150 million loan from the International Finance Corporation (IFC), a member of the World Bank Group. With a term of five years, the IFC-led loan aims to support VIB to boost its loan portfolio for individual customers who are looking to buy, build, and repair houses. Meanwhile, at least 30 per cent of the disbursement value will be financed for home loans worth less than $35,000.

Not only domestic banks, local enterprises also announced huge foreign capital-raising contracts. Specifically, F88 Business Joint Stock Company said it had successfully raised a $60 million loan from CLSA Capital Partners (HK) Limited (Lending Ark) and Lendable. Since the beginning of the year, F88 has raised $70 million from the international fundraising market.

Masan Group Joint Stock Company (Masan) and The Sherpa Company Limited - a direct subsidiary of Masan – have been recently provided a $600 million syndicated term loan. This was the largest syndicated loan with the longest term that Masan has ever raised, attracting 37 lenders in the fundraising process.

Previously, Be Group Joint Stock Company signed a loan contract of up to $100 million with Deutsche Bank (Germany) while Viet Capital Securities Joint Stock Company (VCSC) signed a loan contract with a limit of $105 million and the right to be extended up to $150 million with a group of foreign banks.

At the end of October 2022, Loc Troi Group successfully approached a $100 million credit package provided by Military Joint Stock Commercial Bank (MB) and six international banks with syndicated loans to expand high-quality rice production.

According to Huynh Van Thon, chairman of Loc Troi Group, besides the $100 million signed loan contract, the group hopes to raise another $1 billion from the international capital market to develop one million hectares of high-quality rice. With the $100 million loan, the group has reached an optimal and stable interest rate agreement, which will help it to develop stably in the near future.

Effective solution

According to experts, as fundraising in the domestic market is facing difficulties, the huge deals are a bright spot to help domestic enterprises continually promote their business and production, and create a driver for further growth next year. At the same time, the success is also a motivation for other enterprises to seek new capital.

They said international rating agencies’ upgrade of Viet Nam had created favourable conditions for Vietnamese enterprises to have access to international capital with reasonable interest rates. In September 2022, Moody’s Investors Service upgraded Viet Nam’s long-term issuer and senior unsecured ratings to Ba2 from Ba3. Previously, S&P Global Ratings raised its long-term sovereign credit rating on Viet Nam to BB+ from BB.

Though international capital is currently abundant, not all enterprises can access it due to rigorous standards from international financial institutions. To be qualified for foreign loans, enterprises must have a good reputation, strong financial strength and transparent public data, which are audited by international auditing organisations. Moreover, they must have feasible capital use plans and professional consulting organisations.

Besides, loans for sustainable development projects, SMEs, women-owned enterprises and social projects are also often prioritised for disbursement by international financial institutions.

However, Dr Nguyen Huu Huan, head of HCM City University of Economics’ Finance Department, noted enterprises need to use measures to minimise exchange rate risks when raising foreign capital. He said the US dollar has so far strengthened more than 8 per cent against the Vietnamese dong.

Besides, international capital is not cheap as the US’ federal funds rate currently hits 4 per cent per year, Huan said.

However, he admitted in the context of a cash shortage and difficulties in fundraising in the domestic market, Vietnamese enterprises must diversify capital mobilisation channels and international capital mobilisation remains an effective solution.

FiinGroup’s experts said though interest rates of foreign loans are not cheap with many costs including nominal interest rate, exchange rate insurance cost, guarantee cost and transaction fees, the successful deals are still quite a positive development in the context of tightened domestic fundraising channels.

According to FiinGroup’s experts, the deals also show the confidence of foreign financial institutions in the long-term growth of large Vietnamese enterprises, whose information and credit profile are clear. Fundraising is still possible and the level of risk is reflected in interest rates. Foreign currency loans have also contributed to solving the problem of debt maturity pressure and the need for debt restructuring of some enterprises. — VNS