The Government has just issued Decree No. 81/2020/ND-CP (Decree 81) amending several provisions of Decree No. 163/2018/ND-CP (Decree 163) on corporate bond issuance, effective from September 1, 2020. Decree 81 is said to be an attempt by the Government to tighten and control corporate bonds issuance in Vietnam in the wake of a worrisome proliferation in the amount of issued corporate bonds over the past two years.
The Decree 81 imposes more conditions for issuance of corporate bonds as compared with Decree 163, which, includes, among others, that:
- Each issuance tranche shall be completed within 90 days upon the pre-issuance information disclosure;
- The interval between two tranches of bond issuance must be at least six months and bonds issued within one tranche must be in identical terms and conditions;
- At the time of issuance, total outstanding debt related to corporate bonds raised through private placement of an issuer (including the bonds issued in the given tranche) does not exceed five times of the ownership equity of the issuer pursuant to its most recent quarter financial report;
- There must be an agreement on bond issuance documentation consultancy duly executed between the issuer and an advisory agent, which are licensed securities companies, credit institutions or any entities licensed for the service of bond issuance documentation consultancy service.
The advisory agent shall review the conditions for corporate bond issuance of the issuer before entering into the agreement on bond issuance documentation consultancy.
In addition, under Decree 163, the bonds shall be issued for only three purposes, including project investment funding, extending capital expenditure, or debt restructure. Decree 81 now further requires the issuer to specify in detail the purpose of issuance in bond issuance documentation. Specifically, the issuance documentation must specify details of the investment project and/or specific business operations funded by bond proceeds, and of the debts to be restructured, including the name, value and term thereof.
The bonds transfer shall still be restricted by Decree 81 to the extent of 100 investors within the first year of issuance. However, Decree 81 clarifies that for those bonds issued in the international market, bonds trading restrictions would be subject to the relevant regulations of the market to which the bonds are issued.
Regarding bond issuance procedure, the time for pre-issuance notification by the issuer to the Stock Exchange is reduced from ten working days under Decree 163 to three working days before the planned issuance date under Decree 81. Decree 81 additionally imposes on the relevant depository agent and advisory agent more obligations on regular post-issuance reports. In particular, the depository agent shall report on the completion of issuance to the Stock Exchange within one working day of the bond issuance, and report to the Stock Exchange on deposit registration of the corporate bonds on a monthly, quarterly and yearly basis, rather than only semi-annually and an annual basis under Decree 163. Under Decree 81, the advisory agent must conduct semi-annual and annual reports to the Ministry of Finance on its consultancy business on corporate bonds issuance, which has not been a requirement under the Decree 163.
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