3 new points of Decree No. 08/2023 for removing difficulties of corporate bonds

From March 05, 2023, Decree 08 which amends a number of regulations on government bonds shall take effect. Accordingly, many difficulties for corporations and investors shall be removed. Please follow the new points of Decree No. 08/2023/ND-CP as follows:

1. Can pay the interest and principal payment upon maturity by other assets

This is one of the new points of Clause 3, Article 3, Decree No. 65/2022/ND-CP. Accordingly:

New regulations have amended regulations on the payment of bond principals and interests for bonds privately placed/offered in the domestic market

In particulars, if the bond-issuing corporation cannot pay fully and on time bond interests and principals in Vietnam dong according to the bond issuance plan announced to investors, the corporation may negotiate with the bondholders to pay bond interests and principals upon their maturity by other assets on the following principles

- Complying with civil law and relevant laws. For sectors and trades subject to conditional business investment, complying with the law concerning such sectors and trades.

- Obtaining approval from the bondholders.

- The bond-issuing corporation must disclose extraordinary information and take full responsibility for the legal status of assets used to pay bond interests and principals.

The previous regulation which is prescribed in Clause 3, Article 34, Decree No. 153/2020/ND-CP only prescribes paying fully and on time bond interests and principals upon their maturity and ensuring the exercise of accompanied rights (if any) by bondholders according to conditions and terms of bonds.

It can be seen that the corporate bond market can be removed from the stress on debt payment, and reduced the bond supply in the market and thereby reducing the probability of the sell-off of corporate bonds.

3 new points of Decree No. 08/2023 for removing difficulties of corporate bonds
3 new points of Decree No. 08/2023 for removing difficulties of corporate bonds (Illustration)

2. Maximum period of prolonging the bond’s term is 02 years

In accordance with the previous regulations prescribed in Point b, Clause 3, Article 3, Decree No. 65/2022/ND-CP, corporate bonds that have been issued before September 16, 2022, and remain outstanding by bond-issuing corporations may not change the term of issued bonds, bond-issuing corporations may not change the term of issued bonds

The new points of Decree No. 08/2023/ND-CP (prescribed in Article 2, Decree No. 08/2023/ND-CP) mention the principles on terms and conditions of the bond as follows:

- The change of a representative of bondholders is allowed when it is approved by bondholders representing 65% or more of the total bonds of the same type in circulation.

The bond-issuing corporation must disclose extraordinary information and take full responsibility for the legal status of assets used to pay bond interests and principals

In case of prolonging the bond’s term, the maximum period is 02 years compared to the term specified in the bond issuance plan announced to investors.

In case the bondholders disapprove of the change of terms and conditions of bonds, the bond-issuing corporation shall be responsible for negotiating to ensure the investors’ rights and interests.  In case where the bondholders disapprove of the negotiation plan, the corporation shall fulfill its obligations towards the bondholders according to the bond issuance plan that has been announced to investors.

3 new points of Decree No. 08/2023 for removing difficulties of corporate bonds
Maximum period of prolonging the bond’s term is 02 years (Illustration)

3. Defer the regulations on the credit rating of the bond-issuing corporation

This regulation is prescribed in Article 3, Decree No. 08/2023/ND-CP on provisions on the result of credit rating /of the bond-issuing corporation specified at Point e Clause 1 Article 8 of Decree No. 153/2020/ND-CP, which was amended under Clause 6 Article 1 of Decree No. 65/2022/ND-CP.

Accordingly, the result of the credit rating of the bond-issuing corporation (for bond-issuing corporations subject to credit rating) is the primary document for the private placement/offering dossier. However, in accordance with law provisions prescribed in Decree 08, the Government suspends the implementation effect of this regulation.

Besides, the Decree also suspends the effect of the following provisions:

- Provisions on the identification of individual professional securities investors. Accordingly, investors do not need to prove to be professional with the new asset of a value of at least VND 2 billion.

A bond distribution period of each private placement/offering:  must not exceed 30 days from the date of information disclosure prior to the private placement/offering.

Note: For bond private placements/offerings of which the information contents have been disclosed prior to the bond offering to the concerned Stock Exchange before March 05, 2023, but the bond distribution has not yet been completed, the provisions on the bond distribution period of each private placement/offering:

- Must not exceed 30 days from the date of information disclosure prior to the private placement/offering. The total period of multiple private placements/offerings must not exceed 6 months from the issuance date of the first private placement/offering.

The completion time for the bond distribution is within 30 days from the date of information disclosure prior to the private placement/offering.

Here are 03 new points of Decree No. 08/2023 for removing difficulties of corporate bonds. It can be seen that amended and supplemented regulations in this Decree have totally removed difficulties in the corporate bond market in the last time.

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