After nearly six months since the State Securities Commission canceled nine illegal corporate bond offerings worth VND10.03 trillion by three subsidiaries of Tan Hoang Minh Group, investors have not yet been refunded. Although Tan Hoang Minh pledged to refund 100 percent of the money collected from corporate bond issuance to investors and its representative had many meetings with investors to come up with a solution, the company still could not provide the payment schedule for investors.
Recently, the Investigation Police Agency under the Ministry of Public Security has instituted a criminal case of fraudulent appropriation of property, which occurred at An Dong Investment Group Corporation (An Dong Company) and related organizations and units. Truong My Lan, Chairwoman of Van Thinh Phat Holdings Group Corporation, was arrested for committing fraud in the issuance and trading of bonds to misappropriate trillions of Vietnamese dong from people in the 2018-2019 period.
According to the Hanoi Stock Exchange, in 2018 and 2019, An Dong Company, belonging to the Van Thinh Phat ecosystem, issued three lots of corporate bonds worth about VND25 trillion with a term of five years, expected to mature in the period 2023-2024. Currently, Tan Viet Securities Joint Stock Company (TVSI), one of the bond issuance consulting units of An Dong Company, said that it has been working with issuers to come up with a plan to ensure the repayment of interest and principal to investors before or on the due date of corporate bond lots.
The Ministry of Finance also informed that it has worked with corporate bond issuers related to Van Thinh Phat and An Dong Company, and they all commit to paying investors on time. At the same time, this agency will also actively monitor and ensure the interests of investors.
However, many individual investors who buy corporate bonds related to Van Thinh Phat Group and An Dong Company are sitting on needles and pins because they are worried about whether they can get their money back or not, especially among the three corporate bond batches issued by An Dong Company, there is a corporate bond lot that is non-convertible, without warrants, and is neither secured by assets nor guaranteed for payment.
Who pays bondholders?
In recent years, the corporate bond market has become an important medium and long-term capital mobilization channel, meeting the capital mobilization needs of businesses and gradually reducing dependence on bank credit sources.
From 2019 to now, the volume of corporate bond issuance has increased rapidly, about VND467 trillion per year on average. The size of the corporate bond market is expanding. However, there is a period of rapid development in which the market structure is still unbalanced, and the quality of corporate bond private placement is not high. The use of capital mobilized through the issuance of corporate bonds is still for improper purposes, lacks transparency, and violates regulations, for instance, the recent corporate bond issuances of Tan Hoang Minh Group and An Dong Company.
The volume of corporate bonds issued has increased rapidly recently, creating potential risks, especially a large volume of maturity bonds concentrates in the 2022-2024 period, mainly corporate bonds of real estate enterprises and credit institutions. According to statistics from the Ministry of Finance, the total value of corporate bonds due for repayment within the next three years is up to VND745.4 trillion.
In fact, over the past time, many individual investors who bought corporate bonds through private placement did not understand corporate bonds but were only interested in high-interest rates through the invitations of banks and securities companies (corporate bond distributors). Even many amateur investors were given the license of professional investors to buy corporate bonds.
According to the Ministry of Finance, the primary corporate bond market in the first seven months of 2022 recorded that professional individual investors only held 10.11 percent of the total amount of corporate bonds issued. However, according to FiinPro Financial Data Company, statistics from the secondary market show that the number of corporate bonds held by individuals is up to 32.6 percent, mainly through intermediary purchases with securities companies. This shows that there is a situation that securities brokers invite unprofessional individual investors to invest in lots of corporate bonds as a form of high-interest rate savings.
Meanwhile, corporate bonds are not bank deposits. According to regulations on private placement corporate bonds, enterprises issue corporate bonds on the principle of borrowing by themselves, paying by themselves, and taking responsibility for debt repayment ability by themselves.
Along with that, the corporate bond distributors are only service providers, receive fees from the issuer, and are not responsible for the debt repayment ability of the issuer. The bond underwriting is not a bond payment guarantee. Underwriting is just an underwriter's commitment to the issuer to distribute the number of bonds to be issued and does not have any obligations to investors.
Corporate bonds are an attractive investment channel, but it comes with proportional risk because corporate bonds are medium and long-term investments, and financial indicators related to the issuer can completely change over time. Therefore, the privately-placed corporate bond market is regulated only for professional investors, which means certain conditions must be satisfied, such as knowledge, market understanding, and minimum investment capital.
Therefore, the responsibilities of the underwriter and the issuing agent are extremely important in protecting the interests of investors. Meanwhile, in the past time, the distribution of privately-placed corporate bonds has been carried out mainly through credit institutions, investment funds, or securities companies. However, there has been a lack of close supervision and timely deterrence of the State management agency.