Vinashin-exposed Vietnamese banks get credit negative

Vietnam banks exposed to the Vinashin’s US$600 million unsecured loan were given a credit negative by Moody’s.

Vinashin, the near-bankrupt shipbuilding conglomerate and one of Vietnam’s largest state-owned enterprises, announced that it may delay the first US$60 million principal repayment on a US$600 million unsecured loan arranged by Credit Suisse in 2007.

Because the debt-ridden conglomerate is 100 per cent state owned, the market views its debt as backed by an implicit government guarantee. However, a delay in Vinashin’s debt repayment will raise questions about the extent of government support to Vinashin, other SOEs, and Vietnamese banks.

Moody’s estimates that some state-owned Vietnamese banks could have exposures as high as 3 per cent of their individual loan portfolios. Most of these exposures have not yet been written off and are still categorized as performing and/or special-mention loans.

If there are long-term delays in debt repayment and a lack of government support, banks will be forced to restructure their loans to Vinashin, or eventually write off their exposures to the group, potentially eroding their capital.