Companies offer bonds to individuals

Saturday, Oct 25, 2014 12:07

Small investors were not supposed to buy bonds due to their high costs. – Photo
HA NOI (Biz Hub) — Corporate bonds, inherently meant for organisational investors, are being offered to individual investors as companies wish to raise capital.

Small investors were not supposed to buy bonds due to their high costs. The buyers of bonds were often commercial banks.

Among the first two bond offers being made are by Vietcombank Securities and Tri Viet Investment (TVC). Tong Minh Tuan, Vietcombank Securities Co's head of corporate finance, said that 50 individual investors have registered to buy all its bonds worth VND200 billion (US$9.4 million). On average, each person registered VND2 to VND5 billion ($94,300-235,800).

Tri Viet Investment's bond issuance is worth VND30 billion ($1.4 million) and has not yet been launched.

The bond yields of both companies are higher than the bank rates, helping to lure investors. Vietcombank Securities' bonds yield 8.5 per cent per year, 2.3 per cent higher than its mother bank's deposit rate for the same period. The brokerage will buy back the bonds before maturity on demand, six months from the date of issuance.

Meanwhile, Tri Viet plans to offer a 10.5 per cent rate.

This is proof that corporate bonds are a favourable way of raising capital when banks are tightening loan terms to prevent bad debts. The proceeds, in turn, will probably be used for margin lending.

Tri Viet's board member Quach Manh Hao said in an interview with Dau tu chung khoan (Securities Investment) that the bond market is a forgotten potential segment.

Tuan expects his company to attract more customers thanks to diversified individual portfolios, including shares and bonds.

He also proposed to conduct a second issuance which will be double in value.

One of the remaining problems is the issue of safety of buying bonds, as there is no unified trading system for corporate bonds. Meanwhile, compared to bank deposits which allow investors to withdraw before maturity, it is almost impossible to do so with corporate bonds.

A couple of years ago, some open-ended funds tried to connect small investors with government bonds, but their strategies failed due to the hesitation of the investors. — VNS

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