Foreign banks make lending terms stricter for Vietnamese firms
11-OCT-2008 Intellasia | Nguoi Lao Dong
Oct 11, 2008 - 7:08:00 AM
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Some foreign banks estimate that from now to 2015, Vietnam needs to raise about US$30-50 billion for the economic growth. The majority of capital amount will be raised from international finance market due to the limited domestic capital supply.
Most recently, some foreign banks (including big lenders suffering heavy losses from the US financial crisis) announced that they would halt the lending negotiations as for few projects of EVN. Even they could cancel the previously registered contracts. Therefore, the US$200 million loan for Uong Bi 2 plant expansion project was rejected although EVN had signed a deal with the contractor and advanced 10% of the contract value. Earlier, the project was offered capital by European banks but now EVN is finding it difficult to resume negotiations because foreign lenders seem to be backing out. The deputy general director of EVN, Dinh Quang Tri said that it is very difficult to obtain even a small loan of US$10-20 million at a branch of foreign bank in Vietnam because the parent banks in foreign countries currently are in trouble caused by the US financial crisis.
Foreign banks are now listing stricter lending terms for Vietnamese companies. Earlier, the banks required the borrower to invest at least 25% of the total amount. For example, foreign banks pledged to consider lending if EVN had 25% out of over 40 trillion dong investment capital.
But now, banks require a higher debt capacity from borrowers. EVN must obtain the guarantee of Vietnam's finance ministry for commercial loans.
Among big capital lending contracts, Standard Chartered Bank and Vietnam National Coal, Mineral Industries Group (Vinacomin) on September 16 signed a US$58 million syndicated term loan facility. Of the amount, US$20 million is provided by Standard Chartered Bank, another US$20 million by Cathay United Bank, US$10 million by Malayan Banking Berhad and US$8 million by the Bank of China. Ashok Sud, Chief Executive Officer of Standard Chartered Bank for Vietnam, Laos and Cambodia, said that the 7-year loan showed that Vinacomin had gained credibility in the international financial market. The loan tenure is seven-years which is widely recognised as an impressive achievement under current syndicated loan market conditions when most deals are being done with a tenure of less than five years. Although Vinacomin has a 12-year credit relation with Standard Chartered, the maximum loan limit SC provided to Vinacomin so far is only US$20 million. He expressed his hope that the syndicated term loan will pave way for other future syndicated loans for Vietnamese businesses.
Doan Van Kien, chair of Vinacomin remarked that the lending rate of the contract averages at about 6% per annum, nearly 2% lower than the domestic banks' interest rate.
There are a large number of foreign banks in Vietnam means that Vietnamese businesses have more opportunities to access bank loans without paying an interest rate discount of 10% and asking the permission of State Bank of Vietnam and the finance ministry. However, enterprises who want to borrow foreign loans have to meet strict borrowing conditions of foreign lenders. In addition, it takes 3-5 months of negotiations to gain a loan from the foreign banks.
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