In Vietnam, cross-border financing normally takes place by way of foreign lenders making loans to onshore borrowers only. It is extremely rare (and relatively difficult due to regulatory reasons) for onshore banks to provide financing to offshore entities or individuals. Such outward loans can largely be ignored as a matter of practice.
In terms of structuring, similar to other jurisdictions, financing into Vietnam takes the form of either APLMA-style syndicated or bilateral loans. The number of bilateral loans seem to far exceed syndicated ones, given that there is still a trend for banks in some jurisdictions to finance the investment of foreign investors from the
same jurisdiction in Vietnam.
Not surprisingly, syndicated loans have taken on larger facilities and have played an especially important role in project financing. Recently, several major infrastructure projects have achieved financial close with syndications in amount up to $1 billion. Smaller syndications have involved export credit agencies (ECAs) from Europe, China and the US.
Since land, buildings and other assets affixed on land are generally not available as security in favour of foreign lenders, most syndicated loans have had to rely on corporate guarantees from borrowers’ parents, other moveable assets (notably shares) or both of these. We also notice that in some recent transactions, lenders have tried to use certain creative structures to indirectly have access to security over land use rights and buildings in Vietnam.
In terms of lenders, as noted above, the trend is that bilateral loans come more from lenders from the same jurisdiction as the borrower. As a result, Japanese banks tend to lend more to Japan-invested companies in Vietnam. The same can be said of Chinese banks as well, and so on. In relation to syndicated loans, we think the major Japanese banks (the likes of Sumitomo Mitsui Banking Corporation – SMBC and Mitsubishi UFJ Financial Group – MUFG), Standard market. Government lenders such as the Japan Bank for International Cooperation (JBIC) and China Development Bank (CDB) are also very active in financing major infrastructure projects developed by investors from Japan and China, respectively.
Read the full report here.