High demand for Vietcombank bonds

Investors are snatching up convertible bonds of Vietcombank as the major State-owned bank nears its equitisation this year. With shares in the bank expected to skyrocket in value following the initial public offering, the bonds have suddenly drawn increased interest.
"The value of bonds will be converted into a certain number of shares," said Vietcombank CEO Nguyen Hoa Binh.

Existing bondholders have seen the value of their bonds on the securities market rise accordingly in anticipation of equitisation.
However, recent increases in Vietcombank bond values by 2.5-2.8 times was unreasonable compared to the face value of 100,000 VND (6.25 US$), Binh suggested.

"Obviously, someone who already holds convertable bonds of the bank following the IPO will benefit. But that benefit may be erased for others buying the bonds now if they pay too high a price for them. The bonds pay only 6% interest, lower than current market rates."

Binh also noted, "It is difficult for me or other senior officials to say now what the convertible rate of Vietcombank bonds will be as we are not yet a joint stock bank. The market will determine the value, but I think the rate will be the best mirror for reflecting the true value of the bank."

Foreign investors, Binh pointed out, were allowed to buy Vietcombank bonds but could not exercise rights to convert bonds into shares in the bank.
Another senior official of Vietcombank said that thousands of Vietcombank employees were awaiting the moment when Vietcombank would be equitised. Their foremost concern was what priority they would be given in buying shares.

"The priority given to employees of the bank would partialy affect their dedication to the bank. The bank pays slightly lower salaries than other joint stock banks which also offer rights to their employees to buy shares," the officer said.

"We expect to list and make our IPO at the HCM City Securities Trading Center by July of this year," said Vietcombank general director Vu Viet Ngoan.

Source: VNS Equity Mekong Capital Vinacapital