Billion-dollar guarantee agreement of two world banks for VinFast. What can we see?

, Billion-dollar guarantee agreement of two world banks for VinFast. What can we see?

According to the latest information from VinFast, the company plans to raise about $4 billion from foreign capital with the advice and guarantee of two major financial institutions, Credit Suisse and Citigroup. According to experts, the fact that VinFast does not use capital from Vietnam and that major banks in the world agree to guarantee billions of dollars in capital show the capacity of globalization, as well as the prestige that this brand has built.

VinFast does not use Vietnamese capital to build a factory in the US

On July 13, VinFast officially signed a capital arrangement agreement with Credit Suisse and Citigroup. Specifically, Credit Suisse bank (Singapore) Ltd is the arranger for the issuance and sale of securities of VinFast or its subsidiary globally with a minimum size of 2 billion USD. Meanwhile, Citigroup Global Markets Inc (USA) will be the consultant for the process of raising at least 2 billion USD to build VinFast’s factory in North Carolina (USA).

According to Dr. Nguyen Dinh Cung – Former Director of the Central Institute for Economic Management (CIEM), this means that VinFast does business abroad in a way that does not use existing capital, from Vietnam. Resources for the Vietnamese automaker to carry out major plans in the US will be entirely mobilized abroad.

To do this, first of all, VinFast needs a reputable guarantor to ensure the success of capital mobilization, in this case Credit Suisse and Citigroup. Corporations around the world often choose this way. For Vietnamese businesses, this is considered a great success when creating a launch pad for global development.

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In fact, before that, Vingroup was one of the few Vietnamese enterprises that had ever mobilized large loans from foreign capital. For example, in 2018, VinFast was guaranteed a loan of $950 million by Euler Hermes – an export credit agency under the German Government to import machinery and equipment to serve the establishment of a factory in Hai Phong. Or, most recently in May 2022, Vingroup successfully issued 525 million USD of bonds to the international market to supplement capital for Vingroup, contributing capital directly to VinFast.

Commenting on this, expert Vu Dinh Anh said: “VinFast is rising to the level of a global enterprise. Competitors are global. Therefore, financial resources must also be of a global scale.”

Sharing the same view, Dr. Tran Dinh Thien, former director of the Vietnam Institute of Economics, said that the Vietnamese car company is asserting itself as a “global player of Vietnamese nationality”. Therefore, all operations need to be based on the principle of integration, including the convergence of global financial resources, like the practice that many world corporations are implementing.

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According to the expert, while Vietnam’s resources are still lacking, mobilizing capital from abroad is also a way to show the responsibility of large enterprises to allocate development resources for the country.

“Vietnamese car company is showing global prestige”

From another angle, Mr. Nguyen Dinh Cung analyzed, it is not easy to catch the eye of the world’s leading financial institutions such as Credit Suisse or Citigroup. “Not all businesses are guaranteed by them,” he affirmed.

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According to him, agreeing to guarantee consultancy with the Vietnamese car brand proves that the two big banks appreciate VinFast’s business investment strategy. “World investors, especially the US, don’t care where a business comes from, but they care about its market, business model, idea, industry, and future,” Mr. Cung said.

More importantly, Mr. Cung said that VinFast has demonstrated and recognized “global prestige”. Therefore, in March 2022, when it announced its investment in the construction of a North Carolina electric car and battery factory, VinFast was personally declared “welcome” by US President Joe Biden for being a factor that positively affects the US workforce as well as the US economy. Of the thousands of businesses that want to set foot in this market every year, not all of them are reputable enough to be greeted with such respect.

According to Dr. Tran Dinh Thien, what makes foreign investors appreciate VinFast is the vision of an enterprise that once “dared” decisively to let go of a number of thriving business segments to focus on its core areas, in which choose the future is electric car. “It’s the right choice for the future and humanity. The development approach is the important thing that the world sees in VinFast. They not only look at VinFast but also evaluate a history of Vingroup.” Dr. Tran Dinh Thien analyzed.

Regarding the overall picture, Dr. Nguyen Dinh Cung emphasized that a Vietnamese enterprise, whether private or state-owned, with industrial and high-tech products that are qualified to export to high-demand and fiercely competitive markets like the US, always needs support. However, in fact, there is still negative thinking in similar cases, thinking that investing in the international market is “bleeding” Vietnamese resources or “enriching” foreign countries.

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“In the current open environment, if businesses want to succeed, there is no other way than Go Global – going out into the world to invest, compete fairly on the away field. When businesses develop, the Vietnamese economy can develop. That trend is very necessary and always needs pioneers,” said Mr. Cung.

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@ Cafef

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