Jan. 19 (Bloomberg) -- Vietnam plans to sell $1 billion of dollar-denominated 10-year bonds at a coupon of not more than 7 percent as early as this week, according to the central bank.
The government’s second overseas sale of dollar debt comes after accelerating inflation and a widening trade deficit eroded confidence in the dong, which is trading near a record-low. Vietnam’s global offering will be the third this year by a Southeast Asian nation, with Indonesia having raised $2 billion last week and the Philippines $1.5 billion on Jan. 6. Indonesia scaled back its sale, canceling a planned issue of 30-year notes.
“The new issue should have an absolute yield of around 6.85 percent to 7 percent,” said Sergey Dergachev, who helps oversee $250 billion in assets, including $6 billion in emerging-market debt, at Frankfurt-based Union Investments. “Vietnam is economically much weaker, with significant twin deficits and a highly managed exchange rate.”
Vietnam is rated Ba3 by Moody’s Investors Service, three levels below investment grade. That’s on a par with the Philippines and one grade weaker than Indonesia. The Philippines sold $650 million of 10-year dollar debt this month to yield 5.67 percent and Indonesia sold $2 billion of similar-maturity notes to yield 6 percent.
Vietnam’s dollar bonds have returned 25 percent in the past year, according to indexes compiled by HSBC Holdings Plc. That compares with gains of 21 percent for the Philippines and 54 percent for Indonesia.
Dollar Shortage
The money raised by Vietnam will be used to finance projects of Vietnam Oil & Gas Group, Vietnam National Shipping Lines, Song Da Corp., and Vietnam Machinery Installation Corp., the State Bank of Vietnam said in a statement today on its Web site.
Proceeds of the sale may also help ease a shortage of dollars in the country. The dong declined 5.4 percent against the dollar last year. It traded at 18,477 yesterday in Hanoi, having reached a record-low 18,500 in November.
Vietnam’s consumer prices rose 6.52 percent in December from the year-earlier period, compared with an inflation rate of 4.35 percent in November. The trade balance swang from a first- quarter surplus to a $12.25 billion deficit for all of 2009.
The country has about $16 billion in foreign-exchange reserves, central bank Deputy Governor Nguyen Van Binh said in Hanoi on Dec. 3. The World Bank estimates the nation’s reserves totaled $23 billion at the end of 2008.
Vietnam raised $750 million of 10-year bonds with a coupon of 7.125 percent at its first dollar-dominated bond sale in the international capital market in October 2005, the central bank said in today’s statement.
Source:businessweek.com/
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