A BOT project with many banks participating in credit funding seemed like a good solution, but in fact, there has been projects bankrupted when the capital source fell into plight “Everybody’s business is nobody’s business”.
After three years of implementation, Trung Luong-My Thuan BOT project has just signed a credit contract with four banks funding capital for the project on June 15th,2018.
The representative of the Public - Private – Partnership Department (PPP - Ministry of Transport) said that the main reason for the project’s lumping and slow progress compared to the original plan comes mainly from the financial capacity of the investor and the policy of consolidating credit finance of banks.Started on February 2015, Trung Luong-My Thuan BOT project is the component of Highway line linking Ho Chi Minh City with Can Tho. It is expected to be finished in 2018 to shorten the moving time from Ho Chi Minh City to provinces in Mekong delta, promote socioeconomic development of Southeast, and offload for 1A highway. However, until now, the project still disordered and must delay the completion target by the end of 2020 after 3 years of implementation.Two highway projects constructed slowly due to the banks syndicated loan.
In the early of 2015, before the project was selected for investors, Vietinbank committed to be the clue to arrange credit capital for the project. However, in the process of capital consolidation between banks faced many difficulties, because each bank offered different condition and the interests, so nearly 3 years the project fell into deadlock , the construction site is almost operation because the investor cannot borrow capital from the bank”. On July 15th, The representative of PPP Department said that the investor of this project had just signed a credit contract with 4 banks: Vietinbank, BIDV, VPbank and Agribank, worth 6,850 billion VND. In which, Vietinbank finances 2,300 billion VND for the project to continue deploying but the disbursement condition and method of capital participation of the bank is very unusual. In particular, the banks require investors to completely disburse the equity (around 2,500 billion VND), then they have just started participating credit.
“Every bank is majestic when looking from outside, only when having problems, we will know how inside by investigating agencies. When many banks co-finance credit for project, it is leads to the situation that one bank relies on another bank, the risk of project bankruptcy is very high”. Brigadier Nguyen Huy Ma, former Director of the Department of Police Records (C53, Ministry of Public Security) said. |
Similarly, Bac Giang - Lang Son highway BOT project also fell into stagnation after nearly two years of implementation (from July 2015 to May 2017) because the investors of the project could not mobilize credit capital from the policy of consolidating credit capital for projects of 3 banks: BIDV, Agribank and TPbank. Mr. Nguyen Quang Vinh, General Director of Bac Giang - Lang Son BOT Joint Stock Company said that: In 2015 the three banks committed to co-finance 8,700 billion VND of credit capital for the project, including BIDV (VND 5,000 billion), Agribank (VND 3,000 billion) and TPbank (VND 700 billion). However, due to the business plan changed, each bank assessed investors' capacity differently so that BIDV issued a written request to get out the capital financing commitment in the early of 2016.
“When BIDV intended to finance more than 50% of the credit for the project to withdraw, the other two banks could not meet the capital so the project was seriously deadlock. Contractors have advanced the construction cost but investors do not have money to pay are standing on the brink of bankruptcy.” Mr. Vinh said that to save the broken project, at the end of May 2017, the Ministry The Transport has called on investors at the Deo Ca highway tunnel project to rescue the project through the acquisition of shares of UDIC Investment Joint Stock Company (the company which was head of former investors).
“After discussing with investors, the credit capital difficulties of the project have been unfastened when Vietinbank financed more than 7.000 billion VND. Until now, the project has changed positively, and ensuring the completion progress of Bac Giang-Chi Lang highway project in 2019”, Mr. Vinh said.
Each bank should lends a project is the best solution.
Discussing with Traffic Newspaper, Mr. Nguyen Viet Huy, Deputy Director of PPP Department affirmed that each BOT project has one bank or even many co-financing banks, which have both positive and limited sides. According to Mr. Huy, the BOT projects have large scale and total investment, when implementing the plan of co-financing contracts, small banks can also lend capital to projects and other larger banks will also ensure loan amount following the regulations of the State Bank. This is also a solution to mobilize the capital for North - South expressway projects deploying in the next time.
The financing contract will help banks share risks. However, the appraise process to create a unify document between banks is often difficult, because each bank making a different condition, which takes a lot of time, even does not leading the agreement, so it creating difficult for the credit capital financing of the projects.” Mr. Huy said that a BOT project with only one financing bank that satisfy the financial capacity is the best solution to ensure the project’s effect.
“When there is only one bank which finance the capital, the application evaluation process will be faster, the conditions on loan interest, negotiation and disbursement work will also easy to agree, just only that bank must satisfy the financial capacity for the project and the loan limit are within the limits allowed by the State Bank, ”Mr. Huy shared.
Before being rescued by investors at the road tunnel project, the Bac Giang - Lang Son highway BOT project was bankrupted when the investor couldn’t sign credit contract with co-financing capital banks.
“The bank health is the secret of the Government. Every bank is majestic when looking from outside, only when having problems, we will know how inside by investigating agencies. When many banks co-finance credit for project leading to the situation that one bank relies on another bank, the risk of project bankruptcy is very high”. Brigadier Nguyen Huy Ma, former director of the Department of Police Records (C53, Ministry of Public Security) said that a PPP traffic project with many co-financing credit institutions would face a lot of risks for both the State and investors, or even for citizens and credit providers.
"Selecting one or more than one a bank needs to consider the effectiveness of the project, do not push BOT projects into the situation of "everybody’s business is nobody’s business”, if the investor has already paid the money, the contractor has already done, but we will break the battle without credit capital.” Mr. Ma warned.
An expert on finance bank also said that a BOT project with lots of credit capital financing is quite insufficient. Because each bank has the different form of operating and business strategies, so the banks easy getting trouble when co-financing credit capital for a project.
For example, in the process of implementing project, a bank encountered a problem in its business activities, and didn’t continue to disburse for the project. At that time, the process of capital financing procedures taking a lot of time, leading to longer construction period, reducing the effectiveness of the project, which means the risk, will occur immediately for the capital funders and investors. So, I think that every BOT traffic project should have only one credit funder which have enough financial capacity, experience and reputation to ensure the effectiveness of the project ", the expert shared.
Dinh Quang/ Transport Newspaper
