VIETNAM, July 29 – HÀ NỘI — The corporate bond market has gradually developed into an important medium- and long-term capital raising channel for the economy, under Party and state guidelines.
However, the market has recently grown rapidly, posing potential risks that could affect the sustainable development of capital and bond markets if not effectively controlled.
The Ministry of Finance (MoF) has advised individual investors participating in the private corporate bond market to exercise caution, familiarize themselves with legal regulations and the capacity and efficiency of the production and trading activities of the issuing company, and to understand the risks of corporate bonds before deciding to invest. .
Corporate bonds are not bank deposits, according to the ministry. Companies issue corporate bonds based on the principles of self-borrowing, self-paying, and self-responsibility for the ability to repay debt.
Therefore, investors should know and accept the risks when buying bonds if the company cannot guarantee the obligation to pay the principal and interest of the bond.
According to the provisions of the law in force, private corporate bonds are investment products reserved for professional investors with sufficient financial resources, investment experience and the ability to assess the risks and to accept them when they arise.
Unlike corporate bonds for public offering, which receive certificates of registration from the State Securities Commission (SSC) to be offered to an unlimited number of investors, individual corporate bonds are not authorized by the regulator.
Due to the recent rapid growth of the corporate bond market, many retail investors have purchased private corporate bonds, particularly high yield bonds, through distribution institutions such as securities firms. and commercial banks.
Therefore, the Ministry of Finance has pointed out that investors who are not professional investors are prohibited from buying this form of bond. Investors and the organization providing professional securities investor certification services are liable to heavy fines according to the law if an investor uses methods to become a professional investor illegally.
Investors should also note that credit institutions and securities firms distributing corporate bonds do not guarantee the security of bond purchases.
These organizations are only service providers, receiving service fees from the issuer, but are not responsible for assessing the issuer’s financial situation and debt repayment capacity. Thus, they are not responsible for whether or not the company will repay the principal and interest of the bond on the due date. Bond risk remains issuer risk.
In addition, an underwriting guarantee is not a payment guarantee. If corporate bonds are introduced as collateral, investors should note whether these bonds are guaranteed for payment or underwritten.
According to the MoF, underwriting is the commitment of an underwriting organization to the issuing company to distribute bonds. They have no obligation to investors.
For the payment guarantee, investors should also fully understand the scope of the guarantee, which means whether they guarantee the payment of principal, interest or only part of the principal and interest, and investors will have to bear the risk for the rest.
In particular, the ministry pointed out that the collateral assets of corporate bonds or credit loans have many types, such as housing, stocks, shares, programs and investment projects.
Currently, most collateral assets are real estate and programs, projects, securities or a combination of assets (real estate and securities).
Information on collateral assets issued by companies is mentioned in the disclosure of information, and investors should inquire carefully about collateral terms and the quality and value of collateral assets.
For collateral assets which are projects, assets formed in the future or shares, investors should note that when the stock market and real estate market fluctuate, the value of the assets would decrease and not be enough to pay the principal and interest. of bonds.
Therefore, before buying private corporate bonds, the Ministry of Finance said that investors should understand the legal regulations on professional investors in securities and study the rules on conditions, evidence and regulations on penalties for violation of professional securities investors to ensure they are eligible to be certified. as professional investors.
Investors should also require issuers and distribution organizations to provide complete and accurate information on the issuers’ financial situation, including the raising of bond capital (number of issues, volume issued, loan balance, ability to pay bonds issued) and the criteria for assessing the company’s debt repayment capacity; the purpose of the bond issue; collateral assets; characteristics of bonds, rights and obligations of bondholders, commitments on bonds, bonds of the issuing company and bonds of distribution organisations.
After buying bonds, investors should regularly update the financial situation of the issuer, its debt repayment capacity and consider whether the use of capital raised from bonds is suitable for issuing bonds. .
The ministry stressed that only after educating themselves about the bonds, carefully evaluating and carefully considering the potential risks, investors should decide to buy bonds.
Investors should be careful when entering into investment and cooperation contracts to purchase civil law corporate bonds with other people and organizations, as they bear the risk.
In order to further strengthen the inspection, review and correction of the corporate bond market, on July 20, the Ministry of Finance issued official letter No. 4078/BTC-VP ordering the SSC and other units to continue to intensify the inspection, review and correction of the corporate bond market. market and set up inspection teams on the issuance and provision of services related to corporate bonds with several issuing companies, securities firms and independent audit firms.
Upon detecting violations, the SSC will release the media information to alert the market. VNS