Credit Suisse loans up to $1 billion to Vinashin

Vietnam's largest shipbuilder gets more money from Credit Suisse to help fund its growing business.
Credit Suisse has signed a memorandum of understanding (MOU) to develop a financing programme of up to $1 billion for one of VietnamÆs largest state-owned enterprises, Vietnam Shipbuilding Industry Group (Vinashin). The arrangement will also see Credit Suisse provide other financial services to the company.

As is typical with such deals involving state companies, the MOU was signed in the presence of Vietnamese prime minister Nguyen Tan Dung.

Vinashin controls over 70% of VietnamÆs shipbuilding industry and plays a pivotal role in the countryÆs economy. It has helped Vietnam to earn its place as the eighth largest shipbuilder in the world. The company employs more than 60,000 people and has more than 200 subsidiaries, including 28 shipyards.

Vinashin has signed $8 billion worth of shipbuilding contracts in the past year, according to Reuters. Such rapid expansion means that the companyÆs financing needs are vast. The proceeds of VietnamÆs debut sovereign bond in 2005 û totalling $750 million û are currently on-lent to the company. And in January this year, Vinashin signed a financing agreement with Credit Suisse which resulted in a $600 million loan being extended to the company. This was the first and reportedly the largest offshore corporate loan issued to a Vietnamese enterprise.

Further, Vinashin has stated that it plans to raise 12 trillion dong ($742 million) from domestic bonds this year to fund four shipyard projects. In late September, the company issued 3 trillion dong ($185.6 million) in 10-year bonds in the domestic market to expand its fleet of cargo ships.

"Credit Suisse is a big believer in Vietnam," says Eric Varvel, co-head of Credit Suisse investment banking, commenting on the latest deal. Varvel adds that the bank was "honoured" to be chosen to offer the loan.

"We were very pleased with the first offshore corporate loan arranged by Credit Suisse and would like to continue working with the bank to further expand our business areas," says Pham Thanh Binh, chairman and chief executive officer of Vinashin.

Credit Suisse has been a long-term partner of Vietnam, assisting the country in acquiring credit ratings from both Fitch and Standard and PoorÆs since 2002. In 2007, the bank also advised Vietnam insurance group BaoViet on its strategic stake sale, which was said to be the largest M&A deal ever completed in the country.

Furthermore, the bank was sole bookrunner of the countryÆs 2005 debut bond, but was beaten by Barclays Capital, Citi and Deutsche Bank for the second upcoming benchmark sovereign issue, expected before the end of this year.

Credit Suisse said yesterday that its investment banking and asset management results had been adversely hit by the ongoing global credit crunch, but announced it would nonetheless remain profitable in the third quarter. Meanwhile, its Swiss counterpart UBS announced $3.4 billion of losses on securities linked to the US subprime sector, according to Reuters.
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