Vietnam: What are the prominent regulations on corporate bonds as amended under Decree 08?
- Allow payment of bond principal and interest with other assets according to new regulations?
- Postponing the application of regulations on determining the status of professional securities investors as individuals and corporate credit ratings?
- Enterprises are allowed to extend bond terms for liquidity and debt structure?
Allow payment of bond principal and interest with other assets according to new regulations?
On March 5, 2023, the Government of Vietnam has just issued Decree No. 08/2023/ND-CP on amendments to and suspension of some articles of Decrees prescribing private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market.
According to that, one of the outstanding contents is the regulation on which enterprises can pay the principal and interest of the bonds due with other assets.
Specifically, according to the provisions of Clause 3, Article 34 of the Government of Vietnam’s Decree No. 153/2020/ND-CP prescribing private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market, the bond issuer has the following responsibilities:
Make full and timely payments of bond principal and interests when they become due, and exercise associated rights (if any) for bondholders under terms and conditions of bonds.
Article 1 of Decree No. 08/2023/ND-CP supplements the above provisions as follows:
- In case of offering of bonds in the domestic market where the issuer is unable to make full and timely payment of bond principal/interests in VND according to the issuance plan disclosed to investors as prescribed in Article 17 of this Decree, the issuer may reach agreement with bondholders on payment of bond principal/interests using assets as follows:
(1) The payment must comply with regulations of the civil code and relevant laws. In case of conditional business lines, the payment must also comply with regulations of law governing such conditional business lines.
(2) The payment must be made with consent of bondholders.
(3) The issuer shall make ad hoc information disclosure and assume the full responsibility for the legal status of assets used for paying bond principal/interests in accordance with regulations of law.
Thus, in case the issuer is unable to make full and timely payment of bond principal/interests in cash, the issuer may reach agreement with bondholders on payment of bond principal/interests using assets.
Vietnam: What are the prominent regulations on corporate bonds as amended under Decree 08?
Postponing the application of regulations on determining the status of professional securities investors as individuals and corporate credit ratings?
This content is specified in Article 3 of Decree No. 08/2023/ND-CP, which also clearly states that the following regulations of Decree No. 65/2022/ND-CP shall be suspended until December 31, 2023 inclusively:
(1) Regulations on determination of professional investors that are individuals in Point d Clause 1 Article 8 of the Decree No. 153/2020/ND-CP as amended in Clause 6 Article 1 of the Decree No. 65/2022/ND-CP.
Previously, for professional investors being an individual, Clause 6, Article 1 of Decree No. 65/2022/ND-CP stipulating that professional investors who are individuals must secure an average holding portfolio of at least VND 2 billion within 180 days with the investor's assets, excluding loans.
According to that, the new regulation aims to facilitate the extension/relaxation of debt, and subprime investors can continue to buy new bonds for enterprises to reverse debts, solve immediate difficulties on liquidity and payment of bonds maturing in the period of 2023 - 2024.
(2) Regulations on time limits for distribution of bonds in Clause 7 and Clause 8 Article 1 of the Decree No. 65/2022/ND-CP.
(3) Regulations on reports on credit rating of issuers in Point e Clause 2 Article 12 of the Decree No. 153/2020/ND-CP as amended in Clause 9 Article 1 of the Decree No. 65/2022/ND-CP.
Enterprises are allowed to extend bond terms for liquidity and debt structure?
The regulation on allowing previously issued bonds with outstanding balance to be negotiated to change the bond's term, up to a maximum period of 2 years, is also one of the notable contents in the Circular No. Decree No. 08/2023/ND-CP, specifically as follows:
According to the provisions at Point b, Clause 3, Article 3 of Decree No. 65/2022/ND-CP amending and supplementing a number of articles of Decree No. 153/2020/ND-CP stipulating: Enterprises are not allowed to change the term of bonds issued votes.
However, the above regulation has been amended by Decree No. 08/2023/ND-CP in the direction of allowing enterprises to change the conditions and terms of bonds but must ensure a number of regulatory principles.
Pursuant to Article 2 of Decree No. 08/2023/ND-CP stating that changes in terms and conditions of bonds must comply with the following provisions:
- The compliance with Clause 3 Article 1 of Decree No. 153/2020/ND-CP must be ensured.
- The initial maturity of bonds, as defined in the issuance plan disclosed to investors, may be extended by up to 02 years.
- The issuer shall enter into a negotiation with the bondholder that does not accept changes in terms and conditions of the bond so as to ensure investors’ rights and benefits.
- If the bondholder refuses negotiation, the issuer shall perform all obligations to the bondholder according to the issuance plan disclosed to investors (even if changes in terms and conditions of bond have been accepted by bondholders representing at least 65% of total bonds).
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