Circular No. 150/2011/TT-BTC guiding the exchange of government bonds

CIRCULAR

Guidelines for the exchange of government bonds

_______________

Pursuant to the Public Debt Management Law No. 29/2009/QH12 dated June 17, 2009;

Pursuant to the Securities Law number 70/2006/QH11 dated June 29, 2006, and the amended Securities Law number 62/2010/QH12 dated November 24, 2010;

Pursuant to the State Budget Law No. 01/2002/QH11 dated December 16, 2002;

Based on the Decree number 118/2008/NĐ-CP dated November 27, 2008 stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to the Decree number 01/2011/NĐ-CP dated January 5, 2011 on the issuance of government bonds, government-guaranteed bonds, and local government bonds;

To implement the restructuring of goods pursuant to Decision number 3182/QĐ-BTC dated December 21, 2010 of the Ministry of Finance, thereby contributing to increasing the liquidity of issued government bonds, the Ministry of Finance guides the exchange of government bonds as follows:

Chapter I. GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular provides guidelines on the exchange of government bonds and registration, custody, and listing of exchanged bonds.

Article 2. Applicability

The subjects to which this Circular applies include the State Treasury, owners of bonds subject to exchange, Hanoi Stock Exchange, Vietnam Securities Depository, and other related organizations and individuals.

Article 3. Explanation of Terms

In this Circular, the terms shall be understood as follows:

1. "Exchange of bonds" means the simultaneous purchase and sale of two (02) different bond codes of the same issuer at the same time with the aim of restructuring the bond portfolio.

2. "Treasury bond" (hereinafter referred to as "bond") is a government bond with a term of one (01) year or longer from the date of issuance.

3. "First-time issued bond" is a new type of bond issued for exchange with existing circulating bonds.

4. "Supplementary issued bond" is a supplementary bond issued with the same nominal interest rate and maturity date as the existing circulating bond.

5. "Bond subject to exchange" is the existing circulating bond selected for exchange with first-time issued bonds or supplementary issued bonds.

6. "Exchanged bond" is the first-time issued bond or supplementary issued bond selected for exchange with existing circulating bonds.

7. The "nominal interest rate" of a bond is the annual percentage (%) interest calculated on the face value of the bond that the issuer must pay to the bondholder according to the conditions and terms of the bond as stipulated at the time of issuance.

8. The "remaining term" of a bond is the actual time from the date of bond exchange to the maturity date of the bond.

9. "Bond exchange period" is the timeframe organized by the State Treasury for bond exchange.

10. "Bond exchange date" is the issue date of the exchanged bond to replace existing circulating bonds.

11. "Discount rate" is the annual percentage (%) interest rate used as the basis to determine the price of the bond subject to exchange, the price of the exchanged bond, and the exchange ratio between the bond subject to exchange and the exchanged bond.

12. "Exchange ratio" is the ratio determined between the price of one (01) bond subject to exchange and the price of one (01) exchanged bond.

Chapter II. BOND EXCHANGE

Article 4. Principles of bond exchange

1. Bond exchange must comply with the following principles:

a) Implementation in accordance with the approved bond exchange plan.

b) Ensuring equality in value based on market prices, transparency, and fairness in the exchange process.

c) Compliance with legal regulations and specific provisions of this Circular.

2. During the bond exchange period (from the registration of bond exchange to the completion of the bond exchange), the circulating bonds registered for exchange will be frozen by the Vietnam Securities Depository on the account of the bondholder.

Article 5. Methods for Bond Swapping

1. Bond swapping shall be carried out according to one of the following two methods:

a) The State Treasury issues new types of bonds with conditions and terms determined by the State Treasury to swap for currently circulating bonds.

b) The State Treasury issues additional quantities of bonds under the conditions and terms of a currently circulating bond type to swap for another currently circulating bond type.

2. The Ministry of Finance decides on the method of bond swapping.

Article 6. Conditions and Terms of Swapped Bonds

1. For bonds subject to swapping, the following conditions and terms must be ensured:

a) They are bonds listed on the Hanoi Stock Exchange and have a remaining term of one (01) year or more.

b) They are not bound in any transaction guarantee relationships at the time of swapping.

2. For bonds to be swapped:

a) In the case of supplementary issued bonds, they must ensure the condition of being listed on the Hanoi Stock Exchange and their conditions and terms must match those of currently circulating bonds.

b) In the case of newly issued bonds, they must ensure a bond issuance term of one (01) year or more. The conditions and terms of the bonds are stipulated by the State Treasury based on agreements with bondholders.

Article 7. Discount Rate of Bonds

1. The Ministry of Finance decides on the discount rate range to determine the price of bonds subject to swapping and the price of bonds to be swapped during each bond swapping period.

2. The State Treasury negotiates and agrees with bondholders on the discount rate but must ensure it falls within the range decided by the Ministry of Finance as stipulated in Clause 1 of this Article.

Article 8. Bond Swapping Process

1. At least ten working days before organizing a bond swapping period, the State Treasury publishes information about the bond swapping period on the Ministry of Finance's website and the Hanoi Stock Exchange's website. The content of the notice includes:

a) Conditions and terms of the bonds expected to be swapped, including: listing code; issue date; maturity date; nominal interest rate; bond interest payment method.

b) Conditions and terms of the bonds expected to be received:

 - In the case of supplementary issued bonds, the conditions and terms include: listing code; issue date; maturity date; nominal interest rate; bond interest payment method.

- In the case of newly issued bonds, the conditions and terms include: expected listing code; expected issue date; expected term; principle for determining the nominal interest rate; bond interest payment method.

c) Time for organizing and implementing the bond swapping period.

d) Final registration date for participating in the bond swap.

2. Based on the notice regarding the bond swapping period, bondholders wishing to swap bonds submit to the State Treasury an application for bond swapping according to the form attached in Appendix 1 of this Circular. Applications for bond swapping submitted after the final registration date are invalid.

3. Based on the applications from bondholders, the State Treasury notifies the Vietnam Securities Depository to freeze the number of bonds registered for swapping on the bondholder's deposit account as stipulated in this Circular.

4. Based on the applications from bondholders, the conditions and terms of the swapped bond types, the State Treasury agrees with bondholders on the content of the bond swap according to this Circular, specifically as follows:

a) Determining the discount rate as stipulated in Article 7 of this Circular;

b) Determining the swap date; remaining term of the swapped bond types;

c) Determining the price of the swapped bonds; the price of the received bonds; and the swap ratio of bonds as stipulated in Article 9 of this Circular.

5. If agreement is reached with bondholders on the bond swap, the State Treasury and the bondholders sign an agreement on the swap results. Based on the signed agreement, the State Treasury implements the bond swap and provides detailed swap results to the Hanoi Stock Exchange and the Vietnam Securities Depository according to the form attached in Appendix 2 of this Circular to facilitate registration, deposit, and listing of related bonds.

6. If agreement cannot be reached with bondholders on the bond swap, the State Treasury notifies the Vietnam Securities Depository to unfreeze the swapped bonds registered on the bondholder's deposit account.

7. Upon completion of the bond swapping period, the State Treasury, in coordination with the Hanoi Stock Exchange and the Vietnam Securities Depository, announces the results of the bond swap on the Ministry of Finance's website, the Hanoi Stock Exchange's website, and the Vietnam Securities Depository's website.

Article 9. Determination of Price and Exchange Ratio for Bonds

1. Based on the nominal interest rate, discount rate, and remaining term applicable to the bonds being exchanged that have been agreed upon between the State Treasury and the bondholder, the State Treasury shall determine the price of one (01) bond being exchanged in each case as follows:

a) In the case where the exchange date of the bond is the trading day with rights:

b) In the case where the exchange date of the bond is the trading day without rights:

Where:

GG1 = The price of one (01) bond being exchanged

Lc1 = The nominal interest rate of the bond being exchanged (%/year)

k1 = The number of interest payments per year for the bond being exchanged

d1 = The actual number of days between the most recent interest payment date of the bond being exchanged and the bond exchange date

E1 = The actual number of days within the interest payment period during which the issuer carries out the bond exchange

Lt1 = The discount rate applicable to the bond being exchanged (%/year)

MG1 = The face value of one (01) bond being exchanged

t1 = The actual number of remaining interest payment periods between the bond exchange date and the maturity date of the bond being exchanged

2. Based on the nominal interest rate of the bond being received (in the case of additional bond issuance), the discount rate, and the remaining term applicable to the bond being received that have been agreed upon between the State Treasury and the bondholder according to Article 7 of this Circular, the State Treasury shall determine the price of one (01) bond being received in each case as follows:

a) In the case where the exchange date of the bond is the trading day with rights

b) In the case where the exchange date of the bond is the trading day without rights

Where:

GG₂     =        The price of one (01) bond being received

nh cơ_c2       =        The nominal interest rate of the bond being received (%/year). In the case where the bond being received is a newly issued bond, the nominal interest rate is determined by the discount rate applicable to the bond being received (L_t2)

k₂        =        The number of interest payments per year for the bond being received

For coal-fired thermal power plants where the enterprise holds 100% of the registered capital and uses 100% of its own capital to invest in the project approved by the competent authority, E is determined as 100%;₂        =        The actual number of days between the most recent interest payment date of the bond being received and the bond exchange date

E₂        =        The actual number of days within the interest payment period during which the issuer carries out the bond exchange

nh cơ_t2        =        The discount rate applicable to the bond being received (%/year)

MG₂    =        The face value of one (01) bond being received

organize credit institutions, foreign bank branches are responsible for organizing the implementation of this Circular.₂         =        The actual number of remaining interest payment periods between the bond exchange date and the maturity date of the bond being received

3. Based on the price of one bond being exchanged and the price of one bond being received, the State Treasury shall determine the exchange ratio for bonds as

4. Based on the quantity of bonds being exchanged received from the bondholder and the exchange ratio for bonds, the State Treasury shall determine the quantity of bonds being received returned to the bondholder as follows:

Where:

N |||₂             =       The quantity of bonds being received returned to the bondholder

N |||₁        =        The quantity of bonds being exchanged received from the bondholder

GG₁     =        The price of one (01) bond being exchanged

GG₂     =        The price of one (01) bond being received

5. The quantity of bonds being received determined under Clause 4 of this Article shall be rounded up and is a multiple of one hundred (100).

Article 10. Provisions on registration, custody, and listing

1. Based on the results of bond swaps announced by the State Treasury, the Hanoi Stock Exchange and the Vietnam Securities Depository shall cancel the listing, register, and custody for swapped bonds according to the regulations applicable to the corresponding quantity of swapped bonds.

2. Based on the results of bond swaps announced by the State Treasury, the Hanoi Stock Exchange and the Vietnam Securities Depository shall register, custody, and list the swapped-in bonds according to the regulations applicable to the corresponding quantity of swapped-out bonds.

Article 11. Reporting on the Results of Bond Swaps

Within five working days from the end of each bond swap period, the State Treasury shall report to the Ministry of Finance the specific results of the bond swaps including:

1. The volume of registered swaps for each bond code of the swapped-out bonds in each bond swap period for each bond owner.

2. The actual volume of swapped-out bonds for each bond code.

3. The discount rate applied to each bond owner of the swapped-out bonds according to each bond code.

4. The bond code of the swapped-in bonds and the actual volume of swaps for each bond code.

5. The discount rate applied to each bond owner according to each bond code of the swapped-in bonds.

Chapter III. BOND SWAP FEES AND ACCOUNTING RECORDS FOR BONDS

AND THE ACCOUNTING RECORDS OF BONDS

All costs associated with organizing bond swaps shall be covered and paid by the central budget to the State Treasury at a maximum rate not exceeding 0.01% (one ten-thousandth) of the face value of successfully swapped-out bonds.

Article 13. Accounting Records

1. The State Treasury shall conduct accounting records for swapped-out bonds and swapped-in bonds in accordance with the State Budget Law, the Accounting Law, and related guiding documents.

2. For bond owners, the accounting records for swapped-out bonds and swapped-in bonds shall be conducted in accordance with current laws.

Chapter IV. IMPLEMENTATION ORGANIZATION

Article 14. Responsibilities of Relevant Authorities

1. State Treasury

a) Implementing bond swaps according to the approved bond swap plan and the provisions of this Circular.

b) Upon completion of each bond swap period, summarizing and evaluating the implementation situation, reporting to the Ministry of Finance to further improve policies for subsequent bond swap periods.

2. Hanoi Stock Exchange

a) Cooperating with the State Treasury to announce information about the results of each bond swap period.

b) Based on the notification from the State Treasury, cooperating with the Vietnam Securities Depository to cancel the listing of swapped-out bonds and list or supplementally list swapped-in bonds according to the corresponding volume of swaps under current legal regulations.

3. Vietnam Securities Depository

Based on the notification from the State Treasury, cooperating with the Hanoi Stock Exchange to cancel the registration and custody of swapped-out bonds, and to register, custody, or supplementally register and custody swapped-in bonds according to the corresponding volume of swaps under current legal regulations.

Article 15. Effective Date

This Circular takes effect 45 days from the date of signature and applies to bond swaps starting from 2011 according to the approved bond swap plan.

Article 16. Implementation

1. The Director of the Office, the Department Heads of the Department of Banking Finance and Financial Organizations, the Director General of the State Treasury, and related organizations and individuals shall be responsible for implementing this Circular.

2. During the implementation process, if difficulties or obstacles arise, the State Treasury, relevant units, and related organizations and individuals shall promptly report to the Ministry of Finance for review and specific guidance.