Improving Liquidity in the Bond Market
In late 2022, the Government issued Decree No. 65/2022/ND-CP dated 16 September 2022 (“Decree 65”) amending Decree 153/2020/ND-CP dated 31 December 2020 on the issuance of private corporate bonds.
Decree 65 introduced more stringent conditions and enhanced disclosure requirements applicable to privately-issued corporate bonds, as part of the Government’s drive to develop a more transparent bond market following recent turmoil.
However, Decree 65 created additional difficulties for Vietnamese issuers and failed to restore confidence in the market.
To improve liquidity and jump-start the bond market, on 5 March 2023, the Government issued Decree 08/2023/ND-CP (effective on the same date – “Decree 08”), which amends and postpones the application of certain requirements under Decree 65.
Notably, Decree 08:
- Allows in-kind payment for domestically-issued bonds: If the issuer is unable to repay the principal of the bonds and coupon in accordance with the issuance plan, the bond issuer may negotiate with the bond holder for repayment by way of other in-kind payments, subject to the following principles:
- Such payment is agreed by the relevant bondholders;
- The issuer must make extraordinary disclosure and be solely liable for the legal status of the assets (other than cash) used for payment;
- The payment by in-kind must comply with relevant Vietnamese regulations.
- Amends the terms and conditions of bonds (applicable to bonds issued prior to 16 September 2022):
Previously, Decree 65 prohibited an issuer from changing the maturity date/bond term of bonds issued prior to 16 September 2022 (i.e., the effective date of Decree 65). Decree 08, however, allows the issuer to amend the terms and conditions of the bonds (including the bond term) subject to the following principles:
- They are approved by the competent corporate governance body of the issuer;
- They are approved by holders of at least 65% of bonds of the relevant class;
- The maximum extended term shall be 2 years.
If the bondholder does not agree with the amendment of terms and conditions, the issuer must comply with the original terms and conditions (even if such amendment has been approved by 65% of the bond holder of the relevant class).
- Suspends or postpones the application of certain requirements under Decree 65 until 31 December 2023:
- The requirement on the determination of accredited individual investors: Under Decree 65, only individuals qualified as an “accredited investor” in accordance with the Law on Securities are eligible for privately-issued corporate bonds;
- The application of the 30-day distribution period in multiple-tranche issuance: Under Decree 65, the issuer must complete the distribution of the bond within 30 days upon disclosure of the bond issuance; and
- The requirement that the issuer has a credit rating (applicable to certain issuance as provided in the Law on Securities).
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