In December 2020, the Government issued Decree 153/2020 regulating, among others, the private placement of corporate bonds by Vietnamese issuers. Decree 153/2020 does not regulate public offering of corporate bonds. Decree 153/2020 has the following notable points regarding corporate bond issuance in Vietnam:

Corporate guarantee for bond issuance - Decree 153/2020 allows a private issuance of corporate bond to be guaranteed by a corporate guarantee as opposed to a bank guarantee under Decree 163/2018.
Less conditions for private placement of corporate bonds – Decree 153/2020 no longer requires a company to have at least one year of operation. The requirement of no overdue payment under previous bonds is removed if the issuer plans to issue bond to a selected finance organization.
Bond purchasers – Purchasers of corporate bonds in a private placement are limited to “professional investors” and, in case of convertible bonds, professional investors and strategic investors. Decree 153/2020 also impose express obligations on bond purchasers to study the bond terms, the bond issuers, and be responsible for its investment decision. Trading of bond is also limited to professional investors. It is not clear if this means strategic investors are not permitted to sell its convertible bonds.
Limited ability for direct issuance of bonds - Direct issuance of bonds is limited to issuers being credit institutions. Other issuance of bonds must be done through bidding, underwriting, or sale agent.
New requirement for bond issuance plan – A bond issuance plan must have (1) specific information on the investment project/program or the business or manufacturing operation that needs capital supplement or the capital source to be restructured by the bond proceeds; (2) written confirmation that the issuer has sufficiently paid the principal and interest of issued bond or due debt within three years preceding the issuance of the bond; (3) the financial ratio of the outstanding bond balance/equity of three years preceding the issuance of the bond and after issuance; and the criteria to select strategic investors and list of strategic investors (if the bond is convertible bond or bond with warrant).
Clear timeline for SSC’s approval - For bond private placement that must be approved by the State Securities Committee (SSC), Decree 153/2020 requires the SSC to respond within 10 days from the date the SSC received the full and valid dossiers.
Bond registration and depository – Bonds issued under a private placement must be registered and deposited with one (and only one) licensed member of the VSD within five business days after issuance or approval by the SSC.
No change to bonds issued before 1 January 2021 – Corporate bonds issued before 1 January 2021 could continue to be subject to their existing bond terms and conditions. But Decree 153/2020 does not allow the bond issuers of such bonds to amend the terms of the bonds issued before 1 January 2021.

This post is written by Nguyen Hoang Duy and Nguyen Quang Vu.

Vietnam Business Law