Raising capital by bonds has increasingly attracted many enterprises who aim at approaching more financial resources, especially after Decree 163/2018/NĐ-CP amended by Decree 81/2020/NĐ-CP (“Amended Decree 163”) taking effect. With the replacement of Amended Decree 163 by Decree 153/2020/NĐ-CP (“Decree 153”), corporate bonds offering and transaction activities has been put on a new coat, which is expected to promote this market to develop more stably and sustainably.

More sellers, less buyers

Among the enterprises entitled to offer bonds, Decree 153 recognizes a new face which is PPP project enterprise, compliance with the Law on Public-Private Partnership Investment 2020, which has just come into effect. This is a way to remove the difficult bottleneck in mobilizing capital for PPP projects, when many commercial banks are no longer interested in lending.

Regarding the investors, the Amended Decree 163 formerly allowed all individuals and organizations to purchase bonds. This brought “hot” and dynamic growth to the bond market. However, it also created potential and latent risks for the investors, especially small and non-professional individuals.

Thus, Decree 153 narrows down the buyers corresponding to the types of bonds to be bought, in order to comply with the Law on Securities 2019 which has just come into effect. Accordingly, the enterprises are not allowed to offer bonds to single and non-professional investors. Specifically:

• Only the professional securities investors are entitled to buy all types of bonds (convertible, with warrants, or not convertible without warrants)
• The strategic investors can only buy convertible bonds or with warrants, but under limited extent (less than 100 per batch)

Simultaneously, Decree 153 requires the investors to grasp and fully understand information, self-assessment and take risks arising from purchasing bonds by themselves. On the other hand, the issuing enterprises must disclose information and allow the investors to access the offering documents upon request. These are responsibilities of the investors and enterprises which are clearly provided for the first time.

Removal of many offering conditions but not looseness

According to the former regulations, in addition to some other conditions, the enterprise issuing any type of bonds must satisfy:

• Operating at least one year
• Signing contract with an consulting organization about issuance application
• Limiting the maximum extent of 99 non-professional investors
• Its balance debt limit after issuance shall not exceed five times of owner equity according to the latest quarterly financial report
• Completing each issuance batch within 90 days from the date of information disclosure and ensuring six months apart of each batch
• Regarding convertible bonds or bonds with warrants, the investors are not allowed to transfer for one year from the date of issuance, save for some exceptions

Decree 153 has removed the abovementioned conditions. For the offering of non-convertible bonds without warrants, the laws add new condition (full payment of due debts in the previous three years) and sets different offering conditions between the offering of securities companies, non-public securities investment funds management company and the one of the other remaining enterprises.

It is not looseness, because from now on, only the professional securities investors and strategic investors are entitled to purchase bonds. Therefore, it is not necessary to excessively “tie hands and feet” of the enterprises for the purpose of protecting these professional investors who must always accept “profit and loss” by themselves.

Change of procedure deadlines

Decree 153 also changes the time limit for implementing some corporate bond offering procedures. Specifically, the enterprises need to pay attention that the deadline for registration and depository of bonds is only within five working days after the completion of offering, instead of 10 working days as before. However, the deadline for information disclosure from three days to one day before and from five days to 10 days after each re-offering will give enterprises more time to prepare for better performance.