Luận văn a study on issuing corporate bond the case of bank for investment and development of vietnam bidv

VIETNAM NATIONAL UNIVERSITY, HANOT SCHOOL OF BUSINESS Do Thi Hoa ASTUDY ON ISSUING CORPORATE BOND THE CASE OF BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM - BIDV Major: Business Admi

VIETNAM NATIONAL UNIVERSITY, HANOI

DEVELOPMENT OF VIETNAM - BIDV

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi - 2007

VIETNAM NATIONAL UNIVERSITY, HANOT

SCHOOL OF BUSINESS

Do Thi Hoa

ASTUDY ON ISSUING CORPORATE BOND THE CASE OF BANK FOR INVESTMENT AND

DEVELOPMENT OF VIETNAM - BIDV

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

SUPERVISOR: DR VU XUAN QUANG

Hanvi — 2007

5 Data colleetion method cover

6 Data analysis Hee "—

INTRODUCTION

1 The necessary of research

For some recent years, the bond market has been developing very actively As

so far, the market value of bonds in Vietnam makes up about 8-9 percent of GDP?

The parties engage in the market not only Government, focal Government but also Corporations The number of parties is increasing gradually and there are more and siore financial institutions pay attention to bonds

At that Gime, the Viemam bond market is required to become the really affective capital-leading, channel in the economy Corporations and projects has one

new more funds mobilization charmel, it is issuing bonds, besides the traditional channels, for example, loans from banks In the fact that the bank-centre financial

system approach has successfully contributed to the high-economic growth oulcomes achieved im Vietnam {since banks more effectively monitor fmanciat envirouments characterised by asymmetric information in underdeveloped financial

markets) it has also resulted in the industrial sector’s overreliance on short-term bank intenmedialed borrowings This kind of mdusinal financing behavier has

caused two oritical financial mismatches: a maturity mismatch and a currency mismatch First, the maturity mismatch was the consequence of unhealthy financing

praclices, which were characlerized by large long-lerm investments under the

financing of short-term bank borrowings Second, the practice involved a serious omrency mismatch without a proper currency hedging arrangement In fact, the currency mismatch was implicilly protecled by overvalued exchange rates, which were the result of foreign exchange misalignments in the country By contrast, effective capital markets may play several positive roles: first, there will be greater

diversification of finanemg, an casicr process of risk transformation and a smaller

concentration of financial risks, second, the capital markets may check and screen

+ Source: Report of MOF, 2006

3.6, Issuing process: wes snsssesvestsstrstneeneeneeistnsaeiete 62 3.7, Analyse case StUdY sssosssessenesseesineesesoeeeintn "—

3.7.2 Limitatlons of the traisactlon -.coc is “1?

3.7.3, Advantages oes csenssstssesnenesen siete senssneeinet "H TH

CHAPTER 4 RHCOMMENDATIONS AND 8OLUTIONS verve BL

4.1 Strategy for development of bond market in Vietnam to 2010 8L

4.2.4 Preparing offering documenis seventeen BF

4.2.6, Building book

4.27 Pricing and alloeating bonds mm

4.3 8olutons for developing prumary bond market „ĐỒ 4.3.1 Supply-Side Strategies cuocooeoeeres poset seein IL

4.3.3 Developing Infrastructure sen, Đ8

1.14, Côrpotate bon 1SSUBH0EI uc oeeoeeeireeisrssessesuao T77

1.4.3, Market selection .-1-:.ce-cscrevssssesnsneuneseceserenensensennenesee 2D 1.4.4, Model of issuing process "5ã

1.5 Issuance experienee _ "

1.5.1 Malaysia’s experience on developing bond market sả

1.5.2 Japan’s experience on empirical pricing 35

CHAPTER 2 DEVELOPMENT OF CORPORATE BOND MARKET 41

2.1 Vietnam’s corporate bond market overview ste § Al

DIT Bevisd Gf LOS 200K ssnesvenniaiaenterenesersomedtinenesseiensiedeyneioes OL 2.122; RERGA GE 2005-2006) oso visiiaencsisrdancianaiisenanonranasenian ain AZ

2.2 Compare to some Asian countries qui10:C0040700500088000G80 44

2.3 Major obstacles of the primary corporate bond market 46

2.3.1 Lack of a benchmark yield curve 46

2.3.2 Narrow Investor base : a Ngân ga

3 Limited supply of quality bond issues .48

2.3.4, Inadequate bond market infrastructure cose AB

CHAPTER 3 CASE STUDY: BIDV SENIOR BOND ISSUANCE 49

3.1 BIDV introduction obesesacakus tise x6: 3g ut 49

3.2 Market conditions and Demand i, XzEigggW104a1310,Ai 54

3.2.1 Analyse interest rate sẵn em _ - 54 3.2.2 Asset — liabilities structure as at 28th February 2007 56 3.3 Plan on issuing 3E421950304S429088148E04Đ1ã43vEQ3a521S3512194800048 eT 3.4 Approval from the State Bank of Vietnam ca Để

3.5 Regulation S and other jurisdiction limitations —

1.14, Côrpotate bon 1SSUBH0EI uc oeeoeeeireeisrssessesuao T77

1.4.3, Market selection .-1-:.ce-cscrevssssesnsneuneseceserenensensennenesee 2D 1.4.4, Model of issuing process "5ã

1.5 Issuance experienee _ "

1.5.1 Malaysia’s experience on developing bond market sả

1.5.2 Japan’s experience on empirical pricing 35

CHAPTER 2 DEVELOPMENT OF CORPORATE BOND MARKET 41

2.1 Vietnam’s corporate bond market overview ste § Al

DIT Bevisd Gf LOS 200K ssnesvenniaiaenterenesersomedtinenesseiensiedeyneioes OL 2.122; RERGA GE 2005-2006) oso visiiaencsisrdancianaiisenanonranasenian ain AZ

2.2 Compare to some Asian countries qui10:C0040700500088000G80 44

2.3 Major obstacles of the primary corporate bond market 46

2.3.1 Lack of a benchmark yield curve 46

2.3.2 Narrow Investor base : a Ngân ga

3 Limited supply of quality bond issues .48

2.3.4, Inadequate bond market infrastructure cose AB

CHAPTER 3 CASE STUDY: BIDV SENIOR BOND ISSUANCE 49

3.1 BIDV introduction obesesacakus tise x6: 3g ut 49

3.2 Market conditions and Demand i, XzEigggW104a1310,Ai 54

3.2.1 Analyse interest rate sẵn em _ - 54 3.2.2 Asset — liabilities structure as at 28th February 2007 56 3.3 Plan on issuing 3E421950304S429088148E04Đ1ã43vEQ3a521S3512194800048 eT 3.4 Approval from the State Bank of Vietnam ca Để

3.5 Regulation S and other jurisdiction limitations —

LIST OF TABLES

Table 1 1 Differences between Bond and Loan

Table 1.2 Sample due diligence question topics

‘Table 1.3 Quantitative selection eriteria

‘Table 1.4 Qualitative selection criteria

Table 1.5 The different issuanoe Íormats con

‘Table 3.1 List of 2V outstanding bonds

‘Table 3.2 Government and Corporate locaÏ bonds

Table 4.1 Capital demand of cconomy

LIST OF FIGURES

Figure 1.1 Market selection

Figure 1.2 Issuing process

Figure 2.1, Structure of hond market al the end of the third quarler 2006

Figure 2.2 Quistanding amount of bond from 2001-2006

Figure 2.3 Ouistanding Volume of Local curreney honds

Figure 2.4 Ratio af Goverment bonds and Corporate bonds

Figure 2.5 Corporate bond market Development

Figure 3.1 BIDV Financial results in period of 2001-2006

Figure 3.2 Onshore — offshore investors structure

Figure 3.3 By Business Types

Figure 3.4, By Geography

od 9G

83

4

43 44

1.14, Côrpotate bon 1SSUBH0EI uc oeeoeeeireeisrssessesuao T77

1.4.3, Market selection .-1-:.ce-cscrevssssesnsneuneseceserenensensennenesee 2D 1.4.4, Model of issuing process "5ã

1.5 Issuance experienee _ "

1.5.1 Malaysia’s experience on developing bond market sả

1.5.2 Japan’s experience on empirical pricing 35

CHAPTER 2 DEVELOPMENT OF CORPORATE BOND MARKET 41

2.1 Vietnam’s corporate bond market overview ste § Al

DIT Bevisd Gf LOS 200K ssnesvenniaiaenterenesersomedtinenesseiensiedeyneioes OL 2.122; RERGA GE 2005-2006) oso visiiaencsisrdancianaiisenanonranasenian ain AZ

2.2 Compare to some Asian countries qui10:C0040700500088000G80 44

2.3 Major obstacles of the primary corporate bond market 46

2.3.1 Lack of a benchmark yield curve 46

2.3.2 Narrow Investor base : a Ngân ga

3 Limited supply of quality bond issues .48

2.3.4, Inadequate bond market infrastructure cose AB

CHAPTER 3 CASE STUDY: BIDV SENIOR BOND ISSUANCE 49

3.1 BIDV introduction obesesacakus tise x6: 3g ut 49

3.2 Market conditions and Demand i, XzEigggW104a1310,Ai 54

3.2.1 Analyse interest rate sẵn em _ - 54 3.2.2 Asset — liabilities structure as at 28th February 2007 56 3.3 Plan on issuing 3E421950304S429088148E04Đ1ã43vEQ3a521S3512194800048 eT 3.4 Approval from the State Bank of Vietnam ca Để

3.5 Regulation S and other jurisdiction limitations —

1.14, Côrpotate bon 1SSUBH0EI uc oeeoeeeireeisrssessesuao T77

1.4.3, Market selection .-1-:.ce-cscrevssssesnsneuneseceserenensensennenesee 2D 1.4.4, Model of issuing process "5ã

1.5 Issuance experienee _ "

1.5.1 Malaysia’s experience on developing bond market sả

1.5.2 Japan’s experience on empirical pricing 35

CHAPTER 2 DEVELOPMENT OF CORPORATE BOND MARKET 41

2.1 Vietnam’s corporate bond market overview ste § Al

DIT Bevisd Gf LOS 200K ssnesvenniaiaenterenesersomedtinenesseiensiedeyneioes OL 2.122; RERGA GE 2005-2006) oso visiiaencsisrdancianaiisenanonranasenian ain AZ

2.2 Compare to some Asian countries qui10:C0040700500088000G80 44

2.3 Major obstacles of the primary corporate bond market 46

2.3.1 Lack of a benchmark yield curve 46

2.3.2 Narrow Investor base : a Ngân ga

3 Limited supply of quality bond issues .48

2.3.4, Inadequate bond market infrastructure cose AB

CHAPTER 3 CASE STUDY: BIDV SENIOR BOND ISSUANCE 49

3.1 BIDV introduction obesesacakus tise x6: 3g ut 49

3.2 Market conditions and Demand i, XzEigggW104a1310,Ai 54

3.2.1 Analyse interest rate sẵn em _ - 54 3.2.2 Asset — liabilities structure as at 28th February 2007 56 3.3 Plan on issuing 3E421950304S429088148E04Đ1ã43vEQ3a521S3512194800048 eT 3.4 Approval from the State Bank of Vietnam ca Để

3.5 Regulation S and other jurisdiction limitations —

1.14, Côrpotate bon 1SSUBH0EI uc oeeoeeeireeisrssessesuao T77

1.4.3, Market selection .-1-:.ce-cscrevssssesnsneuneseceserenensensennenesee 2D 1.4.4, Model of issuing process "5ã

1.5 Issuance experienee _ "

1.5.1 Malaysia’s experience on developing bond market sả

1.5.2 Japan’s experience on empirical pricing 35

CHAPTER 2 DEVELOPMENT OF CORPORATE BOND MARKET 41

2.1 Vietnam’s corporate bond market overview ste § Al

DIT Bevisd Gf LOS 200K ssnesvenniaiaenterenesersomedtinenesseiensiedeyneioes OL 2.122; RERGA GE 2005-2006) oso visiiaencsisrdancianaiisenanonranasenian ain AZ

2.2 Compare to some Asian countries qui10:C0040700500088000G80 44

2.3 Major obstacles of the primary corporate bond market 46

2.3.1 Lack of a benchmark yield curve 46

2.3.2 Narrow Investor base : a Ngân ga

3 Limited supply of quality bond issues .48

2.3.4, Inadequate bond market infrastructure cose AB

CHAPTER 3 CASE STUDY: BIDV SENIOR BOND ISSUANCE 49

3.1 BIDV introduction obesesacakus tise x6: 3g ut 49

3.2 Market conditions and Demand i, XzEigggW104a1310,Ai 54

3.2.1 Analyse interest rate sẵn em _ - 54 3.2.2 Asset — liabilities structure as at 28th February 2007 56 3.3 Plan on issuing 3E421950304S429088148E04Đ1ã43vEQ3a521S3512194800048 eT 3.4 Approval from the State Bank of Vietnam ca Để

3.5 Regulation S and other jurisdiction limitations —

Statement on Auditing Slandards State bank of Viclnam

Sccurities & Exchange Commission (US goverment) Singapore Dollar

Quahfied Tnstitulioral Buyer

United States United States Dollar

Viemam on Audi

1 Standards

Viemam Commercial Bank

World Trade Organisalion

Rule 144A (as defined in Chapter 1)

vill

Board of Directors Board of Managements Basic points

Deustche Bank Emst and Young audit company Euro (cwrency)

Generally Accepted Accounting Principles Grish Bristish Pound

Tonhson Stock and Master law vompany Japan Yon

Hongkong Dollar Industrial Commercial Bank The International Capital Market Association Tnlemational

Tnilial public offering Mekong Delta Housing Bank

million

Statement on Auditing Slandards State bank of Viclnam

Sccurities & Exchange Commission (US goverment) Singapore Dollar

Quahfied Tnstitulioral Buyer

United States United States Dollar

Viemam on Audi

1 Standards

Viemam Commercial Bank

World Trade Organisalion

Rule 144A (as defined in Chapter 1)

vill

3.6, Issuing process: wes snsssesvestsstrstneeneeneeistnsaeiete 62 3.7, Analyse case StUdY sssosssessenesseesineesesoeeeintn "—

3.7.2 Limitatlons of the traisactlon -.coc is “1?

3.7.3, Advantages oes csenssstssesnenesen siete senssneeinet "H TH

CHAPTER 4 RHCOMMENDATIONS AND 8OLUTIONS verve BL

4.1 Strategy for development of bond market in Vietnam to 2010 8L

4.2.4 Preparing offering documenis seventeen BF

4.2.6, Building book

4.27 Pricing and alloeating bonds mm

4.3 8olutons for developing prumary bond market „ĐỒ 4.3.1 Supply-Side Strategies cuocooeoeeres poset seein IL

4.3.3 Developing Infrastructure sen, Đ8

Board of Directors Board of Managements Basic points

Deustche Bank Emst and Young audit company Euro (cwrency)

Generally Accepted Accounting Principles Grish Bristish Pound

Tonhson Stock and Master law vompany Japan Yon

Hongkong Dollar Industrial Commercial Bank The International Capital Market Association Tnlemational

Tnilial public offering Mekong Delta Housing Bank

million

financial risks more efficiently and quickly than bank credit departments, based on swifter flows of various information, thereby providing more expedient and

Year of 2006 is opening and dynamic year in the primary bond market

because a series of big corporations such as BIDV, Vinashin, ACB, EVN, issued

a huge amount of bonds However, the demand for capital in the economy still so

big, therefore, issuing bonds will be a potential channel and the bond market will

play au important role in the economy Many Vietuam businesses cousider issuing

‘bonds is one of effective fund mobilization chamnels in order to get short-tena and

long-term financial objectives

Vietnam officially enters World Trade Organization (WTO) in November

2006 This is the opporhmily ta internationalize the bond market Vietnam corporations could issue its bonds in offshore markets; conversely, foreign investors could enter the Viemam bond market, both issuing bonds and trading bonds as well

Trom the reasons, the final thesis titled “A STUDY ON ISSUING CORPORATE BOND - THE CASE OF BANK FOR INVESTMENT AND DEVELOPMUNT OF VLUT NAM” ‘The study provided a real case and updated

international issuing model hence, it will bring some lessons for corporations also other beneficiaries in issuing bonds anda pieture overview of bond market

BIDV is one of the biggest banks mm Vietnam and BIDV bonds would be the landmark in the primary bond market, which presented new method ef issuance, it

is underwriting with best effort and bookbuilding BIDV’s strategy is to become the leading commercial bank in Vietnam with a diverse ownership, a diverse business platform, a well-regarded and a strong financial position similar to that of other

banks tu the South Fasl Asia region As part of its restructuring process, the Issuer

formulated a business model which involves developing from a bank specializing in

3.6, Issuing process: wes snsssesvestsstrstneeneeneeistnsaeiete 62 3.7, Analyse case StUdY sssosssessenesseesineesesoeeeintn "—

3.7.2 Limitatlons of the traisactlon -.coc is “1?

3.7.3, Advantages oes csenssstssesnenesen siete senssneeinet "H TH

CHAPTER 4 RHCOMMENDATIONS AND 8OLUTIONS verve BL

4.1 Strategy for development of bond market in Vietnam to 2010 8L

4.2.4 Preparing offering documenis seventeen BF

4.2.6, Building book

4.27 Pricing and alloeating bonds mm

4.3 8olutons for developing prumary bond market „ĐỒ 4.3.1 Supply-Side Strategies cuocooeoeeres poset seein IL

4.3.3 Developing Infrastructure sen, Đ8

INTRODUCTION

1 The necessary of research

For some recent years, the bond market has been developing very actively As

so far, the market value of bonds in Vietnam makes up about 8-9 percent of GDP?

The parties engage in the market not only Government, focal Government but also Corporations The number of parties is increasing gradually and there are more and siore financial institutions pay attention to bonds

At that Gime, the Viemam bond market is required to become the really affective capital-leading, channel in the economy Corporations and projects has one

new more funds mobilization charmel, it is issuing bonds, besides the traditional channels, for example, loans from banks In the fact that the bank-centre financial

system approach has successfully contributed to the high-economic growth oulcomes achieved im Vietnam {since banks more effectively monitor fmanciat envirouments characterised by asymmetric information in underdeveloped financial

markets) it has also resulted in the industrial sector’s overreliance on short-term bank intenmedialed borrowings This kind of mdusinal financing behavier has

caused two oritical financial mismatches: a maturity mismatch and a currency mismatch First, the maturity mismatch was the consequence of unhealthy financing

praclices, which were characlerized by large long-lerm investments under the

financing of short-term bank borrowings Second, the practice involved a serious omrency mismatch without a proper currency hedging arrangement In fact, the currency mismatch was implicilly protecled by overvalued exchange rates, which were the result of foreign exchange misalignments in the country By contrast, effective capital markets may play several positive roles: first, there will be greater

diversification of finanemg, an casicr process of risk transformation and a smaller

concentration of financial risks, second, the capital markets may check and screen

+ Source: Report of MOF, 2006

1.14, Côrpotate bon 1SSUBH0EI uc oeeoeeeireeisrssessesuao T77

1.4.3, Market selection .-1-:.ce-cscrevssssesnsneuneseceserenensensennenesee 2D 1.4.4, Model of issuing process "5ã

1.5 Issuance experienee _ "

1.5.1 Malaysia’s experience on developing bond market sả

1.5.2 Japan’s experience on empirical pricing 35

CHAPTER 2 DEVELOPMENT OF CORPORATE BOND MARKET 41

2.1 Vietnam’s corporate bond market overview ste § Al

DIT Bevisd Gf LOS 200K ssnesvenniaiaenterenesersomedtinenesseiensiedeyneioes OL 2.122; RERGA GE 2005-2006) oso visiiaencsisrdancianaiisenanonranasenian ain AZ

2.2 Compare to some Asian countries qui10:C0040700500088000G80 44

2.3 Major obstacles of the primary corporate bond market 46

2.3.1 Lack of a benchmark yield curve 46

2.3.2 Narrow Investor base : a Ngân ga

3 Limited supply of quality bond issues .48

2.3.4, Inadequate bond market infrastructure cose AB

CHAPTER 3 CASE STUDY: BIDV SENIOR BOND ISSUANCE 49

3.1 BIDV introduction obesesacakus tise x6: 3g ut 49

3.2 Market conditions and Demand i, XzEigggW104a1310,Ai 54

3.2.1 Analyse interest rate sẵn em _ - 54 3.2.2 Asset — liabilities structure as at 28th February 2007 56 3.3 Plan on issuing 3E421950304S429088148E04Đ1ã43vEQ3a521S3512194800048 eT 3.4 Approval from the State Bank of Vietnam ca Để

3.5 Regulation S and other jurisdiction limitations —

financial risks more efficiently and quickly than bank credit departments, based on swifter flows of various information, thereby providing more expedient and

Year of 2006 is opening and dynamic year in the primary bond market

because a series of big corporations such as BIDV, Vinashin, ACB, EVN, issued

a huge amount of bonds However, the demand for capital in the economy still so

big, therefore, issuing bonds will be a potential channel and the bond market will

play au important role in the economy Many Vietuam businesses cousider issuing

‘bonds is one of effective fund mobilization chamnels in order to get short-tena and

long-term financial objectives

Vietnam officially enters World Trade Organization (WTO) in November

2006 This is the opporhmily ta internationalize the bond market Vietnam corporations could issue its bonds in offshore markets; conversely, foreign investors could enter the Viemam bond market, both issuing bonds and trading bonds as well

Trom the reasons, the final thesis titled “A STUDY ON ISSUING CORPORATE BOND - THE CASE OF BANK FOR INVESTMENT AND DEVELOPMUNT OF VLUT NAM” ‘The study provided a real case and updated

international issuing model hence, it will bring some lessons for corporations also other beneficiaries in issuing bonds anda pieture overview of bond market

BIDV is one of the biggest banks mm Vietnam and BIDV bonds would be the landmark in the primary bond market, which presented new method ef issuance, it

is underwriting with best effort and bookbuilding BIDV’s strategy is to become the leading commercial bank in Vietnam with a diverse ownership, a diverse business platform, a well-regarded and a strong financial position similar to that of other

banks tu the South Fasl Asia region As part of its restructuring process, the Issuer

formulated a business model which involves developing from a bank specializing in

3.6, Issuing process: wes snsssesvestsstrstneeneeneeistnsaeiete 62 3.7, Analyse case StUdY sssosssessenesseesineesesoeeeintn "—

3.7.2 Limitatlons of the traisactlon -.coc is “1?

3.7.3, Advantages oes csenssstssesnenesen siete senssneeinet "H TH

CHAPTER 4 RHCOMMENDATIONS AND 8OLUTIONS verve BL

4.1 Strategy for development of bond market in Vietnam to 2010 8L

4.2.4 Preparing offering documenis seventeen BF

4.2.6, Building book

4.27 Pricing and alloeating bonds mm

4.3 8olutons for developing prumary bond market „ĐỒ 4.3.1 Supply-Side Strategies cuocooeoeeres poset seein IL

4.3.3 Developing Infrastructure sen, Đ8

LIST OF TABLES

Table 1 1 Differences between Bond and Loan

Table 1.2 Sample due diligence question topics

‘Table 1.3 Quantitative selection eriteria

‘Table 1.4 Qualitative selection criteria

Table 1.5 The different issuanoe Íormats con

‘Table 3.1 List of 2V outstanding bonds

‘Table 3.2 Government and Corporate locaÏ bonds

Table 4.1 Capital demand of cconomy

LIST OF FIGURES

Figure 1.1 Market selection

Figure 1.2 Issuing process

Figure 2.1, Structure of hond market al the end of the third quarler 2006

Figure 2.2 Quistanding amount of bond from 2001-2006

Figure 2.3 Ouistanding Volume of Local curreney honds

Figure 2.4 Ratio af Goverment bonds and Corporate bonds

Figure 2.5 Corporate bond market Development

Figure 3.1 BIDV Financial results in period of 2001-2006

Figure 3.2 Onshore — offshore investors structure

Figure 3.3 By Business Types

Figure 3.4, By Geography

od 9G

83

4

43 44

Board of Directors Board of Managements Basic points

Deustche Bank Emst and Young audit company Euro (cwrency)

Generally Accepted Accounting Principles Grish Bristish Pound

Tonhson Stock and Master law vompany Japan Yon

Hongkong Dollar Industrial Commercial Bank The International Capital Market Association Tnlemational

Tnilial public offering Mekong Delta Housing Bank

million

financial risks more efficiently and quickly than bank credit departments, based on swifter flows of various information, thereby providing more expedient and

Year of 2006 is opening and dynamic year in the primary bond market

because a series of big corporations such as BIDV, Vinashin, ACB, EVN, issued

a huge amount of bonds However, the demand for capital in the economy still so

big, therefore, issuing bonds will be a potential channel and the bond market will

play au important role in the economy Many Vietuam businesses cousider issuing

‘bonds is one of effective fund mobilization chamnels in order to get short-tena and

long-term financial objectives

Vietnam officially enters World Trade Organization (WTO) in November

2006 This is the opporhmily ta internationalize the bond market Vietnam corporations could issue its bonds in offshore markets; conversely, foreign investors could enter the Viemam bond market, both issuing bonds and trading bonds as well

Trom the reasons, the final thesis titled “A STUDY ON ISSUING CORPORATE BOND - THE CASE OF BANK FOR INVESTMENT AND DEVELOPMUNT OF VLUT NAM” ‘The study provided a real case and updated

international issuing model hence, it will bring some lessons for corporations also other beneficiaries in issuing bonds anda pieture overview of bond market

BIDV is one of the biggest banks mm Vietnam and BIDV bonds would be the landmark in the primary bond market, which presented new method ef issuance, it

is underwriting with best effort and bookbuilding BIDV’s strategy is to become the leading commercial bank in Vietnam with a diverse ownership, a diverse business platform, a well-regarded and a strong financial position similar to that of other

banks tu the South Fasl Asia region As part of its restructuring process, the Issuer

formulated a business model which involves developing from a bank specializing in

LIST OF TABLES

Table 1 1 Differences between Bond and Loan

Table 1.2 Sample due diligence question topics

‘Table 1.3 Quantitative selection eriteria

‘Table 1.4 Qualitative selection criteria

Table 1.5 The different issuanoe Íormats con

‘Table 3.1 List of 2V outstanding bonds

‘Table 3.2 Government and Corporate locaÏ bonds

Table 4.1 Capital demand of cconomy

LIST OF FIGURES

Figure 1.1 Market selection

Figure 1.2 Issuing process

Figure 2.1, Structure of hond market al the end of the third quarler 2006

Figure 2.2 Quistanding amount of bond from 2001-2006

Figure 2.3 Ouistanding Volume of Local curreney honds

Figure 2.4 Ratio af Goverment bonds and Corporate bonds

Figure 2.5 Corporate bond market Development

Figure 3.1 BIDV Financial results in period of 2001-2006

Figure 3.2 Onshore — offshore investors structure

Figure 3.3 By Business Types

Figure 3.4, By Geography

od 9G

83

4

43 44

Board of Directors Board of Managements Basic points

Deustche Bank Emst and Young audit company Euro (cwrency)

Generally Accepted Accounting Principles Grish Bristish Pound

Tonhson Stock and Master law vompany Japan Yon

Hongkong Dollar Industrial Commercial Bank The International Capital Market Association Tnlemational

Tnilial public offering Mekong Delta Housing Bank

million

Board of Directors Board of Managements Basic points

Deustche Bank Emst and Young audit company Euro (cwrency)

Generally Accepted Accounting Principles Grish Bristish Pound

Tonhson Stock and Master law vompany Japan Yon

Hongkong Dollar Industrial Commercial Bank The International Capital Market Association Tnlemational

Tnilial public offering Mekong Delta Housing Bank

million

INTRODUCTION

1 The necessary of research

For some recent years, the bond market has been developing very actively As

so far, the market value of bonds in Vietnam makes up about 8-9 percent of GDP?

The parties engage in the market not only Government, focal Government but also Corporations The number of parties is increasing gradually and there are more and siore financial institutions pay attention to bonds

At that Gime, the Viemam bond market is required to become the really affective capital-leading, channel in the economy Corporations and projects has one

new more funds mobilization charmel, it is issuing bonds, besides the traditional channels, for example, loans from banks In the fact that the bank-centre financial

system approach has successfully contributed to the high-economic growth oulcomes achieved im Vietnam {since banks more effectively monitor fmanciat envirouments characterised by asymmetric information in underdeveloped financial

markets) it has also resulted in the industrial sector’s overreliance on short-term bank intenmedialed borrowings This kind of mdusinal financing behavier has

caused two oritical financial mismatches: a maturity mismatch and a currency mismatch First, the maturity mismatch was the consequence of unhealthy financing

praclices, which were characlerized by large long-lerm investments under the

financing of short-term bank borrowings Second, the practice involved a serious omrency mismatch without a proper currency hedging arrangement In fact, the currency mismatch was implicilly protecled by overvalued exchange rates, which were the result of foreign exchange misalignments in the country By contrast, effective capital markets may play several positive roles: first, there will be greater

diversification of finanemg, an casicr process of risk transformation and a smaller

concentration of financial risks, second, the capital markets may check and screen

+ Source: Report of MOF, 2006

Statement on Auditing Slandards State bank of Viclnam

Sccurities & Exchange Commission (US goverment) Singapore Dollar

Quahfied Tnstitulioral Buyer

United States United States Dollar

Viemam on Audi

1 Standards

Viemam Commercial Bank

World Trade Organisalion

Rule 144A (as defined in Chapter 1)

vill

Board of Directors Board of Managements Basic points

Deustche Bank Emst and Young audit company Euro (cwrency)

Generally Accepted Accounting Principles Grish Bristish Pound

Tonhson Stock and Master law vompany Japan Yon

Hongkong Dollar Industrial Commercial Bank The International Capital Market Association Tnlemational

Tnilial public offering Mekong Delta Housing Bank

million

financial risks more efficiently and quickly than bank credit departments, based on swifter flows of various information, thereby providing more expedient and

Year of 2006 is opening and dynamic year in the primary bond market

because a series of big corporations such as BIDV, Vinashin, ACB, EVN, issued

a huge amount of bonds However, the demand for capital in the economy still so

big, therefore, issuing bonds will be a potential channel and the bond market will

play au important role in the economy Many Vietuam businesses cousider issuing

‘bonds is one of effective fund mobilization chamnels in order to get short-tena and

long-term financial objectives

Vietnam officially enters World Trade Organization (WTO) in November

2006 This is the opporhmily ta internationalize the bond market Vietnam corporations could issue its bonds in offshore markets; conversely, foreign investors could enter the Viemam bond market, both issuing bonds and trading bonds as well

Trom the reasons, the final thesis titled “A STUDY ON ISSUING CORPORATE BOND - THE CASE OF BANK FOR INVESTMENT AND DEVELOPMUNT OF VLUT NAM” ‘The study provided a real case and updated

international issuing model hence, it will bring some lessons for corporations also other beneficiaries in issuing bonds anda pieture overview of bond market

BIDV is one of the biggest banks mm Vietnam and BIDV bonds would be the landmark in the primary bond market, which presented new method ef issuance, it

is underwriting with best effort and bookbuilding BIDV’s strategy is to become the leading commercial bank in Vietnam with a diverse ownership, a diverse business platform, a well-regarded and a strong financial position similar to that of other

banks tu the South Fasl Asia region As part of its restructuring process, the Issuer

formulated a business model which involves developing from a bank specializing in

Statement on Auditing Slandards State bank of Viclnam

Sccurities & Exchange Commission (US goverment) Singapore Dollar

Quahfied Tnstitulioral Buyer

United States United States Dollar

Viemam on Audi

1 Standards

Viemam Commercial Bank

World Trade Organisalion

Rule 144A (as defined in Chapter 1)

vill

INTRODUCTION

1 The necessary of research

For some recent years, the bond market has been developing very actively As

so far, the market value of bonds in Vietnam makes up about 8-9 percent of GDP?

The parties engage in the market not only Government, focal Government but also Corporations The number of parties is increasing gradually and there are more and siore financial institutions pay attention to bonds

At that Gime, the Viemam bond market is required to become the really affective capital-leading, channel in the economy Corporations and projects has one

new more funds mobilization charmel, it is issuing bonds, besides the traditional channels, for example, loans from banks In the fact that the bank-centre financial

system approach has successfully contributed to the high-economic growth oulcomes achieved im Vietnam {since banks more effectively monitor fmanciat envirouments characterised by asymmetric information in underdeveloped financial

markets) it has also resulted in the industrial sector’s overreliance on short-term bank intenmedialed borrowings This kind of mdusinal financing behavier has

caused two oritical financial mismatches: a maturity mismatch and a currency mismatch First, the maturity mismatch was the consequence of unhealthy financing

praclices, which were characlerized by large long-lerm investments under the

financing of short-term bank borrowings Second, the practice involved a serious omrency mismatch without a proper currency hedging arrangement In fact, the currency mismatch was implicilly protecled by overvalued exchange rates, which were the result of foreign exchange misalignments in the country By contrast, effective capital markets may play several positive roles: first, there will be greater

diversification of finanemg, an casicr process of risk transformation and a smaller

concentration of financial risks, second, the capital markets may check and screen

+ Source: Report of MOF, 2006

Statement on Auditing Slandards State bank of Viclnam

Sccurities & Exchange Commission (US goverment) Singapore Dollar

Quahfied Tnstitulioral Buyer

United States United States Dollar

Viemam on Audi

1 Standards

Viemam Commercial Bank

World Trade Organisalion

Rule 144A (as defined in Chapter 1)

vill

Statement on Auditing Slandards State bank of Viclnam

Sccurities & Exchange Commission (US goverment) Singapore Dollar

Quahfied Tnstitulioral Buyer

United States United States Dollar

Viemam on Audi

1 Standards

Viemam Commercial Bank

World Trade Organisalion

Rule 144A (as defined in Chapter 1)

vill

Statement on Auditing Slandards State bank of Viclnam

Sccurities & Exchange Commission (US goverment) Singapore Dollar

Quahfied Tnstitulioral Buyer

United States United States Dollar

Viemam on Audi

1 Standards

Viemam Commercial Bank

World Trade Organisalion

Rule 144A (as defined in Chapter 1)

vill