Vinalines officially launches restructuring

The Ministry of Transport reportedly just set progress targets for the restructuring of Vinalines, a leading domestic shipbuilder.

Accordingly, restructuring of parent company Vietnam National Shipping Lines (Vinalines) is underway and an IPO will be held in the first quarter of next year.

Vinalines members include the Saigon, Nghe Tinh, Cam Ranh, Can Tho and Nam Can ports, all to be equitised along with the parent company.

Vinalines has proposed halting the restructuring of its main shipping businesses, including Vinalines Shipping, Vinalines Container Shipping and Vinalines Haiphong Maritime Services.

These financially dependent firms will become a structural part of the parent company through the restructuring process.

As well as strengthening its Equitisation Steering Committee, in late March Vinalines submitted its plan for selecting consultants to valuate the company.

Accordingly, to up the pace of restructuring the company the MoT required consultant bidders have experience in Vinalines core areas including shipping and seaport exploitation and with restructuring other state-owned corporations.

“Vinalines will be in shambles in the coming years unless strong measures are taken to push forward its shake-up,” said the company’s new general director Le Anh Son.

Though audited figures are not yet available, it is nearly certain that Vinalines was bogged down in losses last year due to poor shipping performance.

The firm is forecasted to have sustained losses for its fourth consecutive year in 2013 surpassing VND1 trillion ($47.6 million).

“2013 was a tragic year for the shipping business. Though returns in the fourth quarter improved on the rest on the year, only ships bigger than 100,000DWT were profitable, and Vinalines has few such ships,” Son said.

Discussing solutions to the problem, Son said “The biggest challenge in restructuring our fleet is the high investment ratio. Many of our ships were invested in when shipping was at its peak and therefore investment was costly. If we wait for the shipping market to recover, our fleet will get even older and be burdened by expensive maintenance costs. Vinalines must accept selling at a loss to alleviate its financial burdens.”

To ensure the success of its IPO, one of Vinaline’s core tasks this year is completing financial restructuring.

The firm has thus far succeeded in rescheduling debts totalling $196 million from foreign credit institutions and VND43 trillion ($2.04 billion) from local institutions.

Most of the debts will be exempt from interest payments from 1-3 years, but the firm realistically needs 5-6 years, so it still faces massive pressure.

“We still owe the same amount of money and a short extension is not enough to support our restructuring efforts,” Son explained.

One encouraging sign was local commercial banks such as VietinBank reportedly agreeing to swap loans for shares in the company to support its restructuring efforts.

The company is hoping other local creditors will take a similar approach.

MoT chief Dinh La Thang noted this year would mark a turning point in Vinalines’ development.

“Vinalines can equitise successfully if it has an accurate valuation. It has significant advantages in terms of its seaports, a long-established brand and its leadership role in the domestic shipping sector. These are all appealing to investors,” Thang said.