Foreign investors are interested in bad debts with collateral of property assets
Japan’s Samurai Power, Inc. has recently finalized its US$31 million strategic investment deal in IDS Equity Holdings, a Vietnamese capital investment firm specializing in the acquisitions of small-to-medium-sized businesses.
Founded in 1996, Samurai Power is the parent company of Raysum Co., Ltd., which is a public company listed on the Tokyo Stock Exchange. Raysum, founded in 1992, is a pioneer in NPL loan trading in Japan and real estate acquisition of Japan’s state-owned enterprises via securitization. Samurai Power Group has built the largest independent non-performing loan company in Japan.
“After a long and intensive due diligence with IDS Equity Holdings, we realize Samurai Power and IDS share a similar business philosophy and investment goals, in which we get actively involved in supporting the day-to-day operations of investee companies and driving businesses forward,” said Nobuyuki Matsukura, senior executive director of Samurai Power and board member of IDS.
Besides Samurai Power Inc., International Finance Corporation (IFC) has also invested US$65 million into Altus Capital Partners in a move to seek to revitalize distressed companies in Southeast Asian market, including Vietnam.
“The investment will support distressed companies in East Asia’s emerging markets with financing to ensure they can meet their financial obligations, regain creditworthiness, and preserve jobs, thereby contributing to sustainable growth,” Altus Capital said.
The market has also seen some other investors from Korea and China, who are also interested in such kind of assets in Vietnam.
According to analysts, the participation of private investors, especially foreign ones, take an important role in the country’s settlement of NPLs.
Vietnam has also realized the investors’ role in the tough issue as the National Assembly (NA) issued Resolution No. 42/2017/QH at the end of last year, which for the first time allowed private investors, including foreign ones, to participate in debt handling. At the same time, the NA also permitted the transfer of bad debt assets based on the market mechanism.
According to Nguyen Van Du, deputy chief inspector of the central bank, the resolution, which also allows credit institutions and Vietnam Asset Management Company (VAMC) to rapidly repossess collateral if a borrower defaults, had helped the institutions and VAMC manage bad debts more effectively.
As of June 30 this year, credit institutions handled VND138.29 trillion (US$5.9 billion) of bad debt in line with Resolution 42, contributing to reducing the bad debt ratio of credit institutions (exclusive NPLs sold to VAMC) from 2.46 percent on December 31, 2016 to 2.09 percent at the end of June this year.
To speed up the settlement of bad debts, central bank governor Le Minh Hung has recently requested credit institutions to review and provide detailed roadmaps and solutions for settling their bad debts every year until 2022.
Credit institutions are also required to actively look for buyers for the debts they sold to VAMC as the recovery of the debts at the VAMC remains slow and the institutions still have to make significant provisions for the debts.
Hung also asked VAMC to speed up the handling of bad debts and collateral that the company purchased following market-based mechanisms.
According to the development strategy of the banking sector to 2025 approved in August, the central bank targets to reduce the bad debt ratio of the entire banking system from the current 6.6 percent of total outstanding loans to below 3 percent in 2020.