Bankruptcy looms large for firms

Numerous domestic enterprises face bankruptcy due to a dearth of working capital.

For example, Viky Plast Joint Stock Company (VKP) reported a VND13 billion ($634,000) loss for second quarter of this year, the ninth consecutive quarter it had taken a hit.

Due to two years of losses, its owner’s capital fell 45 per cent to VND44 billion ($2.2 million) from its chartered capital of VND80 billion ($3.9 million).

According to VKP’s audited financial report, its short-term debts were higher than short-term assets after deducting its bad debts and losses.

VKP is one of many firms struggling to obtain bank loans due to high lending rates, which account for a half of its total monthly expenditure.

Share prices of the Cadovimex Seafood Import-Export and Processing Company (CAD) also plunged to the floor for several consecutive sessions due to the poorer business results against last year. CAD suffered losses for two consecutive years and its shares were put under control by Ho Chi Minh Stock Exchange.

CAD chairman Vo Thanh Tien said bankruptcy had been considered.

The reasons for CAD’s difficulties were that banks reduced lending to the company and clients did not want to buy CAD products, while some suppliers refused to sell input materials to CAD.

Vo Tan Minh, chairman of BASA Company (BAS) also thought of going bankrupt in May. BAS suffered losses during 2009 and 2010 and in the first six months of this year, BAS reported a VND8 billion loss, resulting that its owner capital has fallen to VND75.5 billion from earlier VND96 billion ($4.7 milion).

Full Power Company (FPC) reported losses for three consecutive years and is to be de-listed. MHC, VSG, SHC, IFS, FBT, VSP, VSG were also expecting bankruptcy.

Market analysts said enterprises’ losses were due to high interest rates, a volatile exchange rate and fierce business environment.

According to the Bankruptcy Law, enterprises were considered bankrupt if they could not pay debts that were due to be paid and the debt owner took the issue to court. – VIR

Tags: Vietnam companies, Vietnam enterprises, Vietnam SMEs