A retail group wants to issue private-placement bonds to refinance bank loans falling due, stretching maturity from two years to five. The board asks plainly: can a non-public company issue at all, which conditions are hard requirements, and what is the biggest risk of swapping bank debt for bond debt?
Legal basis at the time of writing
Private placements of corporate bonds are governed by Law on Securities 54/2019/QH14 and Decree 153/2020/ND-CP on private bond offerings, as amended by Decree 65/2022/ND-CP and Decree 08/2023/ND-CP. Core conditions include: at least one year of operation, audited financial statements for the preceding year, not falling into the decree’s warning criteria on payment capacity, an issuance plan approved by the competent level, and a clearly stated use of proceeds. Issuing bonds to restructure debt is a recognised purpose if the plan identifies the debts being restructured. Buyers of privately placed bonds must be professional securities investors.
Issuance conditions and practical bottlenecks
The first bottleneck is the financial statements: the preceding year must not show a loss under the criteria applied to private placements in tightening periods, and the audit must not carry a material going-concern qualification. The second is the bondholders’ representative and depository, plus registration for trading on the private bond trading system at the Hanoi Stock Exchange — post-issuance steps many companies take lightly until reminded. The third is collateral: after market scandals, professional investors almost by default demand security or a bank guarantee from unrated issuers, making the real cost of issuance higher than the coupon suggests.
The risk of swapping bank debt for bond debt
Bank debt can be renegotiated in difficulty; bond debt has no single counterparty to negotiate with — hundreds of bondholders must be convened through their representative and vote under the issuance terms. Refinancing with bonds therefore only moves liquidity risk to a more concentrated point: the entire principal falls due on one maturity date instead of amortising. An issuer restructuring with bonds should design from the start: staggered maturities across several tranches, a debt-service reserve accumulated quarterly, and flexible early-redemption terms. On liability, false disclosure in the offering file can draw penalties under the current securities sanctions framework and compensation claims from bondholders.
Recommended actions
1. Test issuance eligibility under Decree 153/2020/ND-CP (as amended by 65/2022 and 08/2023) against the prior year’s audited statements before hiring issuance advisers.
2. Design against maturity concentration: several tranches with different tenors, a quarterly debt-service reserve and early-redemption terms, instead of one single issue.
3. Budget the full cost — advisory, bondholder representative, depository and trading registration, and security costs — not just the coupon.
Businesses facing a similar situation should speak with counsel early to settle the approach before signing documents or filing applications.
Frequently asked questions
Can bonds be issued for this purpose?
A non-public company may still issue private-placement bonds under Decree 153/2020/ND-CP (as amended by Decrees 65/2022/ND-CP and 08/2023/ND-CP), provided it has operated at least one year, its audited statements meet the requirements, the issuance plan is approved, and the offer is made only to professional securities investors.
What are the conditions?
Hard conditions include operating history, prior-year audited statements not falling into restricted criteria, an issuance plan stating the debt-restructuring purpose, and compliance with disclosure, depository and trading registration. A company already unable to pay due debts faces major barriers in eligibility review.
What are the risks?
The biggest risk is concentrating all principal on one maturity date with no single counterparty to negotiate with in difficulty, unlike a bank. Add security costs, continuous disclosure duties and liability if the offering file is misleading. Bonds should be only one part of an overall restructuring plan.
What about the interest rate?
The rate is agreed with investors at market: unrated issuers without security usually pay well above bank loan rates. Adding advisory, depository and security costs, the true cost of capital must be compared carefully against restructuring the bank debt instead.
This article has been quality-reviewed by the FLAW AI Legal Council