VPS |  An Overview of the Bond Issuance Process in Vietnam

The Vietnamese stock market is vibrant and promising. On February 28, 2024, the Prime Minister presided over a conference to deploy the tasks of developing the stock market in 2024, emphasizing the goal of upgrading the market from frontier to emerging status by 2025, according to Decision No. 1726/QD-TTg dated December 29, 2023. This goal is an important step to enhance the market's credibility and position internationally, while opening up opportunities for domestic enterprises to access new sources of capital.

Amidst the growing economic potential, the demand for capital by Vietnamese businesses is increasing. Bonds have become a potential channel for businesses to mobilize long-term capital at reasonable costs, helping them expand production, business operations, and sustainable development. With advantages such as stable interest rates and diverse maturity terms, bonds have attracted the attention of many investors both domestically and internationally.

The process of bond issuance may vary depending on individuals and issuing organizations, but this article will address the common and standard procedures in bond issuance. The goal is to provide investors with a comprehensive and objective overview of this process.

1. Basic Introduction

Bonds are an important capital mobilization tool for the government and businesses in Vietnam. The bond issuance process plays a decisive role in ensuring transparency, legal compliance, and protecting the rights of investors. The bond issuance process in Vietnam includes main steps from consultation, preparing documents, appraisal, approval, issuance, and bond management.

2. Main Steps in the Bond Issuance Process

2.1. Document Preparation and Consultation

• Consultation: The issuing organization (government or enterprise) seeks advice from financial institutions, lawyers, or professional advisory organizations to determine a suitable issuance strategy based on its goals and needs.
• Document Preparation: The issuing organization prepares necessary documents including information about the issuing organization, purpose of issuance, issuance conditions, and other relevant information.

2.2. Appraisal and Approval

• Appraisal: Regulatory agencies such as the State Securities Commission (SSC) for corporate bonds conduct an appraisal of the issuance documents to ensure legal compliance.
• Approval: After the documents are appraised and meet the requirements, the regulatory agency grants a license to the issuing organization to proceed with the issuance.

2.3. Pricing and Timing Selection

Pricing: Bond value and interest rates are priced based on factors such as maturity term, risk level, and market conditions.

Timing Selection: The issuing organization selects a suitable timing to maximize capital mobilization efficiency.

2.4. Bond Issuance

Issuing Organization: The issuing organization conducts bond issuance through auction or public offering, depending on the issuance strategy.

Bond Distribution: Bonds are distributed to investors through agents or securities exchanges.

2.5. Bond Management

Payment Monitoring: The issuing organization monitors and ensures timely payments of interest and principal to investors.

Reporting and Disclosure: The issuing organization must provide reports and disclose information related to issuance and bond management.

2.6. End of Bond Term

End-of-Term Payment: Upon maturity, the issuing organization must fully repay the remaining principal and interest to investors.

End of Issuance: The bond issuance concludes when all payments have been completed.

3. Conclusion

The bond issuance process in Vietnam plays an important role in promoting sustainable and efficient development of the bond market. Compliance with laws, transparency, and effective management in the bond issuance process help protect the rights of investors and create favorable conditions for issuing organizations to optimize capital mobilization. Regulatory agencies need to continue improving the bond issuance process to meet the development needs of the market and contribute to enhancing the position of the Vietnamese stock market.