Businesses short on capital as banks crimp lending
Source: 09-MAY-2008 Intellasia | 07/May/2008 Thanh Nien
May 9, 2008 - 7:09:00 AM Banks are tightening new loans hence many businesses have to find any way to borrow capital from different unofficial sources.

In 2007, businesses rushed to issue shares to increase chartered capital and raise capital for investment projects. Additionally, businesses easily received capital surplus after issuing shares. However issuing shares is now uneasy when investors are increasingly indifferent to shares. Presently, corporate bonds are considered an optimal measure for those who need capital for investments. At a recent annual shareholder meeting 2008, the Thanh Cong Apparel Joint Stock Co released its plan on issuing one trillion dong convertible bonds in order to raise capital for real estate projects. Those bonds have a par value of 100,000 dong with three-year terms and a fixed interest rate of 12% a year. The bondholders will be able to convert bonds into ordinary shares. Furthermore, the bondholders owning every 15,000 convertible bonds will be prioritised to buy an apartment at the company's real estate projects including Thanh Cong Tower 1, Thanh Cong Tower 2 and Thanh Cong Tower 4.

As planned, those bonds will be listed at the HCM City Stock Exchange in order to increase liquidity. The Phat Dat Real Estate Development Joint Stock Co also said that it issued 98 billion dong bonds by early 2008. However, the company has high demand for capital because it planned to develop many real estate projects in 2008 and 2009. According to Nguyen Van Dat, chair of Phat Dat, in addition to issuing shares to raise the company's chartered capital from 1.302 trillion dong to 1.5 trillion dong, the company will issue more bonds for projects. Nevertheless, based on different periods and different projects, the company will announce specific volume of bonds to be issued.

A chair of a HCM City-listed company said that corporate bonds will be an optimal selection for companies this year if banks fail to meet their demand for capital.

Meanwhile, the Phu Nhuan Service Joint Stock Co (Maseco) considered borrowing capital from its employees. Truong Thi Thanh Tam, Maseco's chair, said that the company's capital demand is some 200 billion dong. As for investment projects in 2008 and 2009, the capital demand is up to 500 billion dong. In Maseco's business plan, the company has taken initiatives to reduce revenue from export of agriculture products because export of agriculture products need much capital. Besides issuing shares to raise its chartered capital from 30 billion dong to 150 billion dong b early 2009 in order to supplement working capital and have enough counterpart capital to borrow investment capital for projects, the company also planed to issue corporate bonds. However issuing shares and corporate bonds will take time, particularly must get approval from the State Securities Committee. Therefore, Truong Thi Thanh Tam said that the company planned to raise capital from employees in the near future with an interest rate that will be a little bit higher than deposit interest rates.