The Ministry of Finance (MOF) has recently submitted to the Government a draft decree to amend Decree 65 on private placement of corporate bonds in the domestic market and bond offering in the international market.
Of these tentative amendments, the most significant ones are those relating to the time of application of the new standards of professional securities investors and compulsory requirement on credit ratings of bond issuers and the extension of the term of bonds.
Under Decree 65 issued in September 2022, from January 1, 2023, an individual who is identified as a professional investor under the Law on Securities would be eligible to buy privately placed bonds if the daily average value of his securities portfolio, excluding securities borrowed to conduct margin transactions and those of redemption-and-resale agreements, in at least 180 consecutive days is not lower than VND 2 billion (USD 84,740).
The MOF now proposes delaying the application of such regulation to January 1, 2024. As explained by the MOF, the securities market is now facing solvency problems, hence the postponement of the new rule would help individual investors who have financial potential but not yet reached the accumulated time of 80 days continue participating in the bond market while giving the securities market more time to adjust.
Similarly, the time of application of the compulsory requirement on credit ratings of bond issuers would be postponed for one year to January 1, 2024, instead of January 1, 2023, as prescribed in Decree 65.
Explaining its proposal, the MOF said most enterprises are currently encountering difficulties in mobilization of capital. Meanwhile, immediate implementation of the credit rating requirement would increase bond issuance costs for businesses. It is not to mention the fact that it would also take a certain period of time.
Previously, Decree 65 stipulates that from January 1, 2023, a business that wishes to conduct private placement of bonds must possess a corporate credit rating certificate if falling into either of the following cases: (i) the total value of bonds it has issued in 12 months exceeds VND 500 billion (USD 21,185) and 50 percent of its equity and (ii) its total outstanding bond is greater than 100 percent of its equity.
However, for cases of public offering, bond issuers would still be subject to credit ratings from January 2023.
Noteworthily, the MOF also proposes allowing enterprises to change the term of and swap an issued bond for a maximum period of two years against the term in the bond issuance plan announced to investors. The extension must be approved by bondholders representing more than 65 percent of the total bonds in circulation.
In addition, bond issuers and bondholders may reach agreement on conversion of bond principals and interests into loans or other assets.- (VLLF)