Vinashin stays afloat – ground breaking English Scheme approved for a Vietnamese restructuring approved
This latest edition of our Newsletter is very much a 'Special Edition', focusing on the 3-yr restructuring of Vinashin' (Vietnam Shipbuilding Industry Group) US$600 million loan facility. There is also some brief commentary on what are we seeing in the Vietnam restructuring market.
The Vinashin restructuring reached its culmination in early September this year when the UK court sanctioned a Scheme of Arrangement promulgated by Vinashin, the first example of a Vietnamese company going overseas to effect a restructuring. KPMG acted as Financial Adviser throughout the restructuring.
Nothing particularly remarkable, you might think, in the UK court sanctioning a Scheme in order to effect a restructuring. But when one remembers, first, that Vinashin is a Vietnamese state-owned enterprise with no connection to the UK other than the governing law of the loan facility that was the subject of the UK Scheme and, second, that there was no insolvency process under way, either in Vietnam or elsewhere, and then its significance becomes more apparent.
As developed in detail in the article, the story of Vinashin's restructuring has many points of interest beyond the usual that apply to restructurings:
- What does it say about Vietnam as a jurisdiction for investment?
- Are there opportunities for players in the secondary/distressed debt market? Will such investors be keen to play?
- Even that old restructuring chestnut, the (in)famous 'letter of comfort' made a reappearance as a fulcrum issue.How will future Vietnamese restructurings play out?
- What role will Vietnam's insolvency laws have to play?
- Finally, the fact that the UK court accepted jurisdiction for the Scheme on the strength only of a governing-law provision may have wider implications for the restructuring firmament.
The article, which I hope you will find of interest, is authored by Phil Smith, co-head of KPMG Vietnam's Restructuring Services practice and who, together with Hanoi partner Do Thi Thu Ha, and the undersigned, Eddie Middleton, who leads the KPMG advisory team.
Should you have any comments or related queries to the content, please do not hesitate to contact any of us.
The dedicated KPMG Restructurin Services team on the ground in Vietnam is now 1 year old
We are seeing increasing instances of Vietnamese banks taking affirmative and assertive action to address individual distressed loans, with debt for equity swaps remaining a restructuring option that certain Vietnamese banks are considering. KPMG are currently advising on such a potential restructuring involving a multi bank group. Given that the rehabilitation procedures of the Vietnamese Bankruptcy Law are not applied in practice the focus is on driving consensual restructurings with creditors.
Vietnamese banks are also exploring alternatives to address their NPL challenges, other than transferring them to the newly established Vietnam Asset Management Company (VAMC). Some banks are looking at potential sales to the private sector, which may lead to distressed investment and restructuring opportunities in the future.
State Owned Enterprises (SOEs) are seeking to restructure and reform, in line with the Government's directions, by enhancing their corporate governance, corporate structure and divesting non core businesses. However, these are fundamental changes which will take time and the benefits of the changes being made are not obvious at this time. Projects which are funded by development banks such as the Asian Development Bank are helping to push the pace of change and KPMG have been assisting certain SOEs through the reform process.
With the exception of Vinashin, instances of foreign lender driven restructurings are few.