Convertible Bond Issuance and Strategic Investor Purchase Rights

Which businesses are allowed to issue convertible bonds?

Pursuant to Clause 3, Article 9 of Decree 153/2020/ND-CP, there are regulations as follows following:

Conditions for bond offering

1. For the offering of non-convertible bonds without warrants (excluding the offering of bonds by securities companies and securities investment fund management companies that are not public companies), the enterprise must meet the following conditions:

a) Be a joint stock company or limited liability company established and operating under Vietnamese law.

b) Fully pay both principal and interest of the bond has issued or fully paid all debts due for 03 consecutive years before the bond issuance (if any); except in the case of offering bonds to creditors who are selected financial institutions.

c) Meet financial safety ratios and operational safety ratios according to specialized laws.

d) Have a bond issuance plan approved and accepted according to the provisions of Article 13 of this Decree.

dd) Have a report The financial year immediately preceding the year of issuance is audited by a qualified auditing organization according to the provisions of this Decree.

e) Subjects participating in the offering as prescribed in Point a, Clause 1, Article 8 of this Decree.

2. For the offering of non-convertible bonds without warrants of a securities company or a securities investment fund management company that is not a public company: the enterprise must meet the conditions specified in Points a, c, d, dd and e, Clause 1 of this Article.

3. For offering convertible bonds or bonds with warrants:

a) The issuing enterprise is a joint stock company.

b) Subjects participating in the offering as prescribed in Point b, Clause 1, Article 8 of this Decree.

c) Satisfy the offering conditions specified in Point b, Point c, Point d and Point dd, Clause 1 of this Article.

d) Individual convertible bond offerings and bonds with individual warrants must be at least 06 months apart from the date of completion of the most recent offering.

d) Conversion of bonds into shares and exercise of warrants must meet the regulations on the ownership ratio of foreign investors according to the provisions of law.

Thus, according to the above regulations, convertible bonds are issued by joint stock companies

Can strategic investors buy convertible bonds?

Pursuant to Clause 1, Article 8 of Decree 153/2020/ND-CP, amended by Clause 6, Article 1 of Decree 65/2022/ND-CP as follows:

Investors buy bonds votes

1. Bond buyers

a) For non-convertible bonds without warrants: bond buyers are professional securities investors according to the provisions of securities law.

b) For convertible bonds and bonds with warrants: bond buyers are professional securities investors, strategic investors, in which the number of strategic investors must be less than 100 investor.

c) A professional securities investor is an investor with financial capacity or expertise in securities as prescribed in Article 11 of the Securities Law. Organizations responsible for identifying professional securities investors and documents identifying professional securities investors shall comply with the provisions of Article 4 and Article 5 of Decree No. 155/2020/ND-CP dated December 31, 2020 of the Government detailing the implementation of a number of articles of the Securities Law and documents amending, supplementing and replacing (hereinafter referred to as Decree No. 155/2020/ND-CP), except for determining professional securities investors specified in Point d of this Clause.

d) Determining a professional securities investor as an individual according to the provisions of Point d, Clause 1, Article 11 of the Securities Law to purchase privately issued corporate bonds must ensure that the listed and registered securities portfolio held by the investor has a minimum value of 02 billion VND, determined by the average daily market value of the securities portfolio for a minimum period of 180 days immediately preceding the date of determination of investment. The way a professional stock investor does, does not include the value of loans for margin transactions and the value of securities for resale transactions. The determination of a professional securities investor at this point is valid within 03 months from the date of confirmation.

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Thus, according to the above regulations, strategic investors are eligible to buy convertible bonds, in which the number of strategic investors must be less than 100 investors.

What are the benefits of strategic investors who buy convertible bonds?

Pursuant to Clause 3, Article 8 of Decree 153/2020/ND-CP, amended by Clause 6, Article 1 of Decree 65/2022/ND-CP, strategic investors who buy convertible bonds have the following rights: following:

– Full information is disclosed by the issuing enterprise according to the provisions of this Decree; have the right to access bond offering documents upon request.

– Have the issuing enterprise pay the interest and principal of the bond in full and on time when due, and exercise the accompanying rights (if any) according to the terms and conditions of the bond and agreements with the issuing enterprise.

– Have the right to request the issuing enterprise to buy back the bonds before maturity according to the provisions of Clause 3, Article 7 of the Decree This.

– Bond sellers are required to provide full information disclosure content of the issuing enterprise according to the provisions of this Decree when buying bonds on the secondary market.