Vietnam: Principles of corporate bond issuance

Vietnam: Principles of corporate bond issuance

1. What are corporate bonds?

 “corporate bond” means a type of debt security with a term to maturity of at least 01 year, issued by an enterprise to confirm the bondholder's legitimate rights and interests over a part of its debts according to Clause 1, Article 4 of Vietnam's Decree 153/2020/ND-CP.

2. Principles of corporate bond issuance

According to Article 5 of Vietnam's Decree 153/2020/ND-CP stipulating the principles and use of corporate bond issuance as follows:

(1)  An issuer shall issue bonds according to the rules of conventional loans, assume responsibility for the use of raised funds and ensure its repayment capacity.

(2) Bond are issued for executing investment projects/programs; increasing working capital; restructuring the issuer’s funding sources or serving other purposes prescribed in specialized laws.

The bond issuance purposes must be specified in the issuer’s bond issuance plan as prescribed in Article 13 hereof and disclosed to investors registering for purchase of bonds. The funds raised from a bond issue must be used for the purposes specified in the issuer’s bond issuance plan and notified to investors.

(3) In addition to the provisions in item (1) and (2) of this Article, the funds raised from the issuance of green bonds must be separately recorded and managed, and disbursed to the environmental protection projects/projects that generate environmental benefits specified in the approved bond issuance plan.

3. Fundamental terms and conditions of bonds

Fundamental terms and conditions of bonds under Article 6 of Vietnam's Decree 153/2020/ND-CP are as follows:

- Bond term: decided by the issuer in each offering based on its demands for funds.

- Quantity of bonds issued: decided by the issuer in each offering based on its demands for funds.

- Currency used in issuance and payment for bonds

+ The currency used in issuance and payment of bond principals and interests of bonds offered in the domestic market is Vietnamese dong (VND).

+ The currency used in issuance and payment of bond principals and interests of bonds offered in the international market is a foreign currency according to regulations adopted in the issuing market and regulations on foreign exchange management.

- Face value:

+ Face value of a bond offered in the domestic market is VND 100.000 (one hundred thousand) or a multiple of VND 100.000 (one hundred thousand).

+ Face value of a bond offered in the international market shall comply with regulations adopted in the issuing market.

- Bond form:

+ Bonds are offered in the forms of certificates, book entries or electronic data;

+ The form of bond in each offering shall be decided by the issuer according to regulations adopted in the issuing market.

- Coupon rate:

+ The coupon rate of a bond may be the fixed interest rate over its entire term, floating interest rate or a combination of these two interest rates.

+ If the coupon rate is the floating interest rate or combination of the fixed interest rate and floating interest rate, the issuer shall indicate the reference rate which is used as the basis for determining the floating interest rate in the bond issuance plan and also notify it to bond buyers.

+ The issuer shall decide the coupon rate in each bond offering in conformity with its financial health and repayment capacity. In addition to the provisions herein, the coupon rate of bonds issued by a credit institution must also comply with regulations on interest rates adopted by the State Bank of Vietnam (SBV).

- The bond types shall be decided by the issuer in accordance with regulations of law.

- The method of principal and interest payment shall be decided by the issuer based on its demand for funds and the practices of the issuing market, and shall be notified to investors before the bond offering.

Quoc Dat

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