Vietnam: Things to know about issuance of international bonds

Decree No. 95/2018/ND-CP of Vietnam’s Government regulates several important issues regarding the issuance of international bonds. To be specific:

Scheme for issuance of international bonds

- Based on the 05-year borrowing and repayment plan, the 03-year public debt management program, the annual budget estimate, the annual borrowing and repayment plan and the international financial market developments, the Ministry of Finance shall formulate the scheme for issuance of international bonds, and submit it to the Government for approval.

- A scheme for issuance of international bonds is formulated in accordance with regulations in Clause 3 Article 28 of the Law on Public Debt Management of Vietnam and includes the following contents:

+ The method for selection of an organization or a syndicate to take charge of managing the bond issuance, legal advisors and relevant agencies, and the plan for issuance of international bonds;

+ Estimated costs associated with the issue of international bonds.

Approval for a scheme for issuance of international bonds

Based on the scheme for issuance of international bonds, the Government shall promulgate a resolution on approval for the policy for issuance of international bonds with the following contents:

- Purposes;

- Quantity, currency and term of international bonds to be issued;

- The market where bonds are issued;

- Policy on tax on bondholders' income from bond principal and interest;

- Estimated costs associated with the issue of international bonds;

- The method for selection of an organization or a syndicate to take charge of managing the bond issuance, legal advisors and relevant agencies;

- Responsibility of the Ministry of Finance and relevant organizations and individuals.

Pursuant to the policy for issuance of international bonds approved by the Government, the Prime Minister shall make decision on each issue of international bonds with the following contents:

- Quantity and term of bonds to be issued, and issuance method;

- Planned interest rate;

- Planned registration, depositing, listing and trading of bonds;

- Issuance date.

Documentation of issuance of international bonds

- A documentation of issuance of international bonds includes legal documents prepared by the Ministry of Finance in cooperation with domestic and foreign legal advisors and relevant agencies in accordance with the law of Vietnam and the law of issuing market.

- A documentation of issuance of international bonds includes:

+ The prospectus;

+ Underwriting agreement;

+ Consultant agreements;

+ International bond purchase agreements;

+ Agency agreements, including:

• Printing agency: the organization authorized to print bonds, prospectuses and relevant documents;

• Listing agency: the organization authorized to carry out procedures for listing of bonds of the issuer on appropriate stock markets in conformity with regulations applicable at the place where bonds are listed;

• Financial and settlement agency: the organization authorized to make payment of bond principal and interest on behalf of the issuer to investors, and manage the list of bond buyers in each issue;

• Transfer agency: the organization authorized to prepare reports on bondholders, cancel and issue certificates, and take actions against issues relating lost, damaged or stolen certificates;

• Trust agency: the organization appointed by bondholders to exercise their rights and comply with bond terms and conditions;

• Depository: the organization accepting depositing of international bonds, managing deposited bonds, and confirming the transfer and assignment of bonds on the market.

+ Written legal opinions;

+ Relevant documents.

Organizing issuance of international bonds

- The Ministry of Finance shall take charge and cooperate with relevant ministries, authorities and organizations to issue bonds according to the Government's policy and the Prime Minister’s decision made on each bond issue.

- Based on the reality and pursuant to relevant laws, the Ministry of Finance organizes the issuance of international bonds according to the following steps:

+ Select organizations or syndicates that are experienced international financial organizations or investment banks to manage the bond issue;

+ Select experienced domestic and foreign legal advisors to provide legal advice for the Ministry of Finance and the organization(s) or syndicate(s) in charge of managing the bond issue;

+ Prepare bond issuance documentation: The Ministry of Finance shall take charge and cooperate with domestic and foreign legal advisors and relevant agencies to prepare the bond issuance documentation in accordance with the law of Vietnam, international laws and international practices applicable at the issuing market;

+ Sovereign credit rating: The Ministry of Finance shall take charge and cooperate with relevant ministries and authorities in contacting the credit rating agency to certify the sovereign credit rating and credit rating for bonds to be issued;

+ Promotion: The promotion of international bonds is made to meet requirements of each issuance method. The Ministry of Finance shall cooperate with the organization or syndicate in charge of managing the bond issuance to organize promotion programs so as to bring information concerning international bonds to international investors before the official announcement of the issuance of international bonds;

+ Issuance of international bonds: The Ministry of Finance shall decide terms and conditions of international bonds by consulting the organization or syndicate in charge of managing the bond issuance in conformity with market situation and principles specified in the scheme for issuance of international bonds approved by the Government or the Prime Minister. The Ministry of Finance shall decide the interest rate on international bonds of each issue according to the interest rate bracket announced by the Prime Minister under regulations in Point b Clause 2 Article 31 herein.

+ Receiving funds: The Ministry of Finance shall receive funds from issued international bonds according to the signed agreements;

+ Completion of bond issue: Upon the receipt of payments for international bonds, the Ministry of Finance shall complete the bond issue and enter into legal documents to validate transactions in accordance with laws applicable at the issuing market; report the bond issue results to the Prime Minister.

More details can be found in Decree No. 95/2018/ND-CP of Vietnam’s Government, which takes effect from July 01, 2018.

-Thao Uyen-

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