Such is the reputation built up by Vietnam’s high growth, low debt story that the bonds yielded less than corresponding issues from established names in the region, including the Philippines and more notably Indonesia.
From an initial guidance of 7.25% the 10-year notes were ultimately priced at 7.125% on October 27 last year, compared with 7.75% for Indonesian 10-year bonds and 8.09% for the comparable Philippines issue. Despite an increase in the deal size to $750 million from $500 million, the sale was six times oversubscribed, with sole bookrunner Credit Suisse able to claim an impressive range and broad distribution of high-quality investors.
“It’s been a very important event for the country in terms of establishing itself and its profile,” says Jon Pratt, head of debt capital markets for non-Japan Asia at Credit Suisse. Pratt believes the positive precedent will encourage follow-up issues: “I’m quite confident you’ll see some further issuance from Vietnam this year,” he adds.
The Vietnamese economy grew at the fastest pace since 1996 last year, an 8.4% rate, which it aims to match for the rest of the decade. The government, striving to keep infrastructure developments aligned with the runaway pace of its economy, will use the proceeds from the bond sale to finance state-owned enterprises. It now wants companies to follow its lead and secure their own debt financing on international markets.
The timing of the deal, four years in the making, capitalized on favourable assessments of Vietnam by both Moody’s and Standard & Poor’s. Just a week before the issue, S&P upgraded its outlook on the country’s long-term debt to positive from stable.
“We give Credit Suisse a lot of credit for having accomplished this bond deal; it was an excellent way for Vietnam to raise its profile,” says Rick Mayo-Smith, chief executive of Indochina Capital, a securities and property firm based in Ho Chi Minh City.