Vietnam’s listed construction firm Ho Chi Minh City Infrastructure Investment Corp (CII) is targeting fresh investments from US pension and insurance funds, by completely loosening up its foreign ownership limit, according to a report by local newswire Nhip cau dau tu.
The plan was approved during CII’s extraordinary shareholder meeting this week despite concerns of a possible takeover of the company when foreign investors are allowed to own up to 100 per cent of CII equity.
Le Quoc Binh, the company’s CEO, reportedly said that shareholders need not to worry about takeovers. On the contrary, CII will be able to raise more funding and management expertise as overseas investors come in, he said.
Vietnam slashed the cap on foreign ownership limit in September. A spate of local businesses have planned to remove their own ceiling since then.
Currently, foreign investors are collectively holding 46 per cent of CII. Fund management firms under the US-based investment banking group Goldman Sachs are strategic shareholders at CII. However, according to Binh, despite having the engagement of Goldman Sachs, CII has not been able to attract US investors, especially pension and insurance funds, which offer low cost of funding at only 1.5-2 per cent per year.
“Thus, the lifting of foreign holding limit will help a lot. An international investor will not be willing to support the operation of the company if it holds just a few per cent of equity, but it will be a different story if we are generous enough to offer 10-20 per cent,” the Nhip cau dau tu cited Binh as saying.
Goldman Sachs is still holding $25 million worth of CII’s convertible bonds, which will mature on January 27 next year. The converting prices for Goldman Sachs units are VND10,000 and VND18,800, while CII stock price is being traded at around VND24,000 apiece. Earlier in October, the Vietnamese firm said it was examining the possibility to extend the maturity date of the bonds by one more year, to January 27, 2017.
Related story: CII to buy back shares from Goldman Sachs
However, shareholders of the Vietnamese company rejected the plan during the meeting. “US investors are waiting for us to finish the conversion of these bonds. Only by then, they will consider investments in CII,” Binh reportedly said.
Addressing the claim that the converting prices are too low in comparison with the market price of the company’s stock, Binh explained that it was not a management mistake but simply a timing issue. In 2013, CII encountered a lot of difficulties caused by market turmoils, so raising money from Goldman Sachs was a reasonable decision, according to the CEO. Over the past two years and within the coming time, as Goldman Sachs is converting the bonds into shares in a lucrative deal, CII’s performance has improved since that time, he added.
However, Binh also announced that the company will end its bond issuance programme, saying that it is better to sell shares to existing shareholders instead, then shareholders will be the beneficiaries.
Also at the shareholder meeting, CII said it will expand to real estate business by considering the acquisition of 577 Corporation, another listed company. Regarding the Thu Thiem underwater tunnel in Ho Chi Minh City, CII will probably sell part of the project to a Malaysian partner.