The corporate bond crisis in Vietnam started in 2022 during which many corporate bonds issued before September 2022 under Decree 153/2020 were defaulted by the issuers (Pre-2022 Bonds). To facilitate the potential restructuring of Pre-2022 Bonds, in 2023, the Government issued Decree 8/2023 which allows for the bond issuers and the bondholders to agree to amend the terms of a Pre-2022 Bonds including the extension of the duration for the Pre-2022 Bonds to up to two years. However, the rights of a bondholder who disagrees with a restructuring proposal for a Pre-2022 Bond are not clear. 

Under Decree 8/2023, the duration and the repayment schedule of a Pre-2022 Bond could be extended if the proposed extension is approved by bondholders representing 65% or more of the total number of outstanding bonds. Decree 8/2023 further provides that for bondholders who do not agree to changes in the conditions and terms of a Pre-2022 Bond (dissenting bondholders), the issuer is required to negotiate with the dissenting bondholders. If a dissenting bondholder does not accept the proposed negotiation plan, the issuer must fully fulfill its obligations to that dissenting bondholder in accordance with the original bond issuance plan. This requirement holds even if the proposed changes have been approved by the other bondholders who hold 65% of the outstanding bonds.

However, this requirement fails to clarify whether the dissenting bondholders still have the rights under the restructuring plan (where such rights are favourable to them) even if they disapprove of the restructuring plan in the first place. For example, under Decree 153/2020, a bond issuer must make full and timely payments to all bondholders based on the terms and conditions of the Pre-2022 Bonds that have been modified and have been approved by the 65% majority of the bondholders. Therefore, the dissenting bondholders could argue that the bond issuer still has to perform the payment schedule under the restructuring plan even if they disagree with the restructuring plan.

If a dissenting bondholder of a Pre-2022 still has the rights under a bond restructuring plan then a dissenting bondholder will have advantages over the consenting bondholders since a dissenting bondholder could have the rights under both the original issuance plan and the restructuring plan. On the other hand, a consenting bondholder only has rights under the restructuring plan. This situation could discourage bondholders of a Pre-2022 Bond from providing consent to a bond restructuring plan. 

This post is written by Ta Phuong Thao and edited by Nguyen Quang Vu.