Bond issuers must fulfill payment commitments, finance ministry reiterates

While the bond market is a key source of capital mobilization for companies, buyers need to be aware of regulations, a spokesperson for the ministry told reporters Tuesday after the recent arrests of leaders of property developers Tan Hoang Minh and Van Thinh Phat.

Corporates are responsible for fulfilling their issuance commitments, and issuance advisors and distributors need to cooperate with both issuer and investor to ensure this, he warned.

Investors need to understand that bonds have higher risks than bank deposits for instance, and need to do their own due diligence before investment, he said.

The ministry expects investors to be prudent and discount rumors, he said.

Van Thinh Phat, chairwoman of Truong My Lan was arrested last month for alleged fraud related to the issuance and trading of bonds worth trillions of dong (VND1 trillion = US$40.2 million) in early October.

Police have blocked the transfer of assets by 762 companies and 14 individuals related to the company.

Hanoi-based Tan Hoang Minh, a developer of major luxury apartment projects, saw its chairman and five executives arrested in April due to alleged fraud in nine bond issuances worth VND10 trillion.

Some investors have been complaining that banks do not provide them with full details about bonds they distribute and often lead them to think they are making a deposit and not buying bonds.

In recent years the government has been tightening bond issuance regulations and repeatedly warning investors about risks.

In the first 10 months the value of bonds issued fell by 25% year-on-year to VND328.9 trillion. Banks accounted for 41% of them, followed by property developers with nearly 29%.

Companies redeemed VND152.5 trillion worth of bonds in the period, up nearly 50% year-on-year.