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| International bonds invested in road projects |
| 22/Mar/2010 Intellasia | Thanh Nien |
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| 22 Mar, 2010 - 11:27:17 AM |
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BOT Phu My Bridge Joint Stock Co (PMC) has sought authorities' approval to issue $700 million of government-guaranteed international bonds tor raise investment capital for three key road projects in HCM City. This capital raising method has not been carried out so far.
Nguyen Thanh Thai, general director of PMC said that his firm is studying the plan of building three key road projects including BOT Saigon Bridge 2 project worth $136 million, BOT tramway No 1 ($246 million), BOT and BT Nhon Trach Bridge ($246 million). Total investment capital for three projects is estimated at $762 million. Apart from the ownership capital of $62 million, PMC will mobilise more $700 billion through issuing international bonds.
Capital supply for road projects is always in scarcity because of the limited capital source of state budget and domestic banks. Thus, it is better and more convenient if investors themselves can mobilise long term investment capital from issuing international bonds. Recently, PMC worked with US Goldman Sachs Group, one of the world's leading financial arranger in the international capital market. The group said that PMC could raise capital via international bonds instead of borrowing commercial credit of a bank, like Phu My Bridge project. Goldman Sachs pledged to support PMC to mobilise the necessary investment capital amount by issuing Vietnamese government-guaranteed bonds (in US dollar) with a suitable coupon rate.
If gaining the government's approval, the bond issue will meet many advantages thanks to Goldman Sachs. The US group also committed to buy all remaining international bonds of PMC, Thai added.
After the issue, PMC will negotiate with some state commercial banks (such as Vietcombank, Vietinbank, Bidv) to reach an agreement of managing capital raised from the issue of international bonds. PMC's international bonds will carry a coupon rate lower a half or one third of loan rates of domestic banks.
According to HCM City People's Committee, while the city's budget remains limited, enterprises have the right to raise a variety of capital sources (outside the state budget) to carry out the key road investment and development projects in HCM City. In which, the bond issue on the international market is also the feasible capital mobilisation method.
Le Tham Duong-head of HCM City Banking University's Business Administration Department said that the international bond issue of enterprises is worthily encouraged. However, both government and enterprises must predict pressure from coupon rates as well as forex rate risks.
In the plan of issuing $700 million of international bonds, investors should focus on highly potential risks of road investment because capital turnover of road investment projects is usually slower than investing in other sectors. Meanwhile, 3-5 years (term of PMC's international bonds) is not enough long for the enterprise to stabilise receivables of long term infrastructure development projects, excluding damages and losses in road investment works. Construction time of road projects could be prolonged due to difficulties in clearing ground or underground works with derivative costs.
Regarding capital withdrawal, Luong Hoang Trung, vice president of HCM City Goods Transportation Association warned PMC should re-consider the feasibility of BOT Saigon Bridge 2 project (that is one of PMC's projects calling for international capital).
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