Recently, it seemed that the draft decree on the offering and trading of privately placed corporate bonds in the domestic market and the offering of corporate bonds to the international market was finalized for submission to the Government’s sign-off.
Noticeably, the purposes of bond proceeds under the draft have been amended as follows:
_Draft decree (Article 5.2): purposes narrowed/clarified to (i) implementing investment projects under the forms of investment provided in the Investment Law, (ii) restructuring debt of the issuer itself, and (iii) other purposes under specialized law. This is considered by the market as significant tightening – the phrase “các hình thức đầu tư quy định tại Luật Đầu tư” means forms of investment prescribed under the Investment Law, which is narrower than just “investment programs/projects.” under the prevailing regime, yet clarifies the purposes for capital contributions, share/capital acquisitions, and BCC.
_Change of issuance purposes now clarifies: (a) approval by authorized body, (b) 65% bondholder approval, and (c) completed mandatory early redemption of dissenting bondholders. This consolidates/strengthens the approval mechanism.
_Draft decree requires issuers to set out specific measures for monitoring and supervising the use of proceeds. Where the issuer channels proceeds to a second party (for example, a project company) for investment purposes, the issuer must put in place measures to monitor and supervise such second party’s use of proceeds in accordance with the approved issuance plan. This addresses a common pattern in real-estate and group-financing structures and creates a clearer compliance obligation.
_Decree codifies a practice that the market has long relied on but which was not clearly permitted under Decree 153 – where the disbursement schedule has not yet been reached, the issuer may temporarily park bond proceeds in bank deposits or bank certificates of deposit, provided that the plan for use of such temporarily idle funds is disclosed in the issuance plan. This is a helpful clarification and reduces the compliance risk associated with idle proceeds.
_For bonds secured by real estate, the commercial bank or foreign bank branch chosen by the bondholder’s representative is the institution responsible for receiving and managing the collateral.
