The bank engaged HSBC as ratings advisor, joint arranger and joint bookrunner. BIDV was also a joint arranger and joint bookrunner.
The deal received over VND4 trillion ($250 million) in indicative orders û more than double the initial target of VND1.5 trillion target offering. Given the strong demand, the issuer decided to upsize the institutional offering to VND2 trillion.
The tranches include a Vietnamese dong-denominated 10-year bond due in 2016 with an issuer call option in 2011. It is priced with a spread of 1.05% over the five-year Vietnamese government bonds for a yield of 9.80%. There is also a second tranche of Vietnamese dong-denominated 15-year bonds due in 2021 with an issuer call option in 2016. That's priced with a spread of 1.26% over the 10-year Vietnamese government bonds for a yield of 10.20%.
The bonds are being sold to onshore investors, including foreign investors who are residents in Vietnam. Bankers claim foreign investors who are not residents have also shown strong interest, but regulations prevent the sale of these bonds to offshore investors at this time.
Institutional investors û such as insurance companies and banks û bid for VND2 trillion of final orders. To allow retail investors access to the offering, an additional VND100 billion of these bonds will be offered through branches of BIDV in Hanoi and Ho Chi Minh City starting Tuesday (May 9). The offering will be formally closed by May 19, or when it is sold out.
The bonds will be listed on the Ho Chi Minh City Stock Trading Centre soon after the issue date to ensure efficient trading in the secondary market.
"This is a good start, a good introduction for foreign banks to be involved in the local market," says Joshua Matthews, associate director debt finance global investment banking of HSBC. "If you want to take a developmentary role then you have to take it up a notch."
Matthews was referring to the fact that the new issue follows closely on the announcement last week of BIDV's credit ratings (deposits and senior debt ratings equal to that of the sovereign) as assigned by MoodyÆs Investor's Services. (BIDVÆs ratings are stable outlooks for local and foreign currency deposit and issuer, and a positive outlook for financial strength), and the use of many international practices in the structuring and pricing of the transaction.
Obtaining an international rating is not standard practice, or required in Vietnam. As Tier 2 bonds, the issue is expected to strengthen BIDV's capital adequacy ratio. The inclusion of call options five years before maturity and an accompanying increase in the coupons allows the bonds to be priced against their respective call dates and is in line with structures typically found in the international markets for such structures.
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