LEADING-EDGE TRANSACTIONS: What are Leading-Edge Transactions for Possible Replication?

Name:Ho Chi Minh City Bonds
Entered On:08/16/2007 at 11:31 AM
Updated On:08/08/2011 at 12:16 PM
Year of Financial Closure:2003
Host Country:Vietnam
Project Majority Ownership:public
Innovative Aspects:This transaction shows how sub-sovereign entities can tap into new sources of financing for infrastructure.

Nguyen Van Dua explains in the attached paper “The Issuance of City Municipal Bond & Develop Urban Areas of Ho Chi Minh City”:
“In 2003, Ho Chi Minh City was the first city which issues municipal bonds to raise funds for development investment.
1. First issue - HCMC Securities Corporation (through underwriting and being agent) has sold the notes at 170 sites throughout the country (including treasury systems and banks). As a result, HIFU raised VND 250 billion of municipal bond, VND 200 billion of which was 2–year maturity and VND 50 billion of which was 5-year maturity.
2. Second issue - Auction on HCMC Securities Trade Center (on 09/12/2004):
- Tender volume: VND 250 billion (5-year maturity)
- Winning tender rate: 8.35% per year (equal to upper interest limit stipulated by
HCMC People’s Committee), with winning tender volume: VND 250 billion, and 04
tender winners.”

Source: Dua, Nguyen Van. The Issuance of City Municipal Bond & Develop Urban Areas of Ho Chi Minh City. Paper presented at the City Development Strategies - From Vision to Growth and Poverty Reduction Conference, Hanoi, November 24 – 26, 2004.

The attached article “Current Experiences, Opportunities and Innovations in Municipal Financing in Ho Chi Minh City, Vietnam” highlights that:
“Successful municipal bond issuances in Ho Chi Minh City opened up a new fund raising channel with advantages of longer term and stable financing, reasonable cost of financing,…suitable to infrastructure projects, not only for Ho Chi Minh City but for other provinces in Viet Nam as well. This financing has contributed to capital mobilization for infrastructure development and overcome drawbacks of commercial lending from banks. In 2004, HIFU has issued another USD 127 million of municipal bond for the City.”

Source: Ho Chi Minh City Investment Fund For Urban Development. Current Experiences, Opportunities and Innovations in Municipal Financing in Ho Chi Minh City, Vietnam. Ho Chi Minh City: HIFU. 2004.

http://financeguide.euwi.net/index.php?id=4

Source(s):
Documents: Vietnam - Ho Chi Minh Bonds - Van Dua (2005).pdf
Vietnam - Ho Chi Minh Bonds - na (2004).doc
Vietnam - HIFU PDA - WB (2007).pdf