Vietnam’s Banks Enter International Debt Markets

May 11, 2012 By Natasha Brereton-Fukui and Isabella Steger

With Indonesia’s banks finally returning to international debt markets, Vietnamese lenders are starting to follow suit, despite the country’s recent run-ins with foreign investors.

Vietnam Joint Stock Commercial Bank for Industry and Trade, the country’s second-largest lender by market cap, sold a US$250 million five-year bond Friday, marking the first ever international bond by a Vietnamese financial institution. It’s also a significant step for the country, as this is the first benchmark-sized deal from Vietnam since the government sold a $1 billion dollar bond in January 2010.

The deal was heavily oversubscribed, with $700 million in investor orders from over 110 accounts. The bond was priced to yield 8.25%, according to a term sheet seen by Dow Jones Newswires. Asian investors took 40% of the offering, Europeans 37% and U.S. 23%. Fund and asset managers absorbed 48%, while private banks took 28%, banks’ own accounts 14%, public institutions 8% and corporates the remaining 2%.

It’s an encouraging sign for Vietnam, whose international reputation has taken a hit because of the scandal surrounding and subsequent loan default by state-owned shipbuilder Vietnam Shipbuilding Industry Group, or Vinashin. The company defaulted on a $600 million syndicated loan in December 2010, amid broader investor concerns over the country’s bloated state sector and soaring inflation.

The government has taken steps to address these issues in recent months, for example reviving a process of partial privatizations and sentencing former executives of Vinashin to prison for mismanaging the firm.

The only straight dollar bond to have been publicly offered by a Vietnamese issuer since the Vinashin debacle, according to Dealogic data, was a US$87 million deal by Hoang Anh Gia Lai Joint Stock Co. in May 2011.