Vinashin gets Vietnam government loans at 0% interest rate to pay workers

Vietnam Shipbuilding Industry Group, the state-run company that is struggling to repay debt, will be allowed to get interest-free loans from the government to pay its workers, according to a directive from the prime minister.

The loans to Vinashin, as the company is known, will have a maximum maturity of 12 months, the directive from Prime Minister Nguyen Tan Dung said on the government’s website, without giving a value. They will help the company pay wages, severance allowances and social, health and unemployment insurance.

Vinashin’s debts have swelled to 86 trillion dong ($4.3 billion) following its expansion into areas ranging from securities to tourism as part of a government strategy of building industry through state firms. The nation’s debt is also under scrutiny, with Standard & Poor’s and Moody’s Investors Services this month downgrading Vietnam’s credit rating.

Moody’s said last week that Vietnam and its state-backed companies will face greater difficulties borrowing money after reports Vinashin failed to make a payment on a loan to foreign creditors.

Moody’s on Dec. 15 lowered the country’s credit rating to B1, four steps below investment grade. A week later, S&P cut Vietnam to BB-, three levels below investment grade.

Vinashin will be offered the interest-free loans through Vietnam Development Bank, a state-run lender that funds national projects, and Vietnam Bank for Social Policies, a government lender for social welfare programs, Dung said in the statement.

The Ministry of Finance will work with the Ministry of Planning and Investment to allocate some funds to help the two banks make the loans, the statement said. Vinashin will give the lenders a list of employees at its units who need to be paid. The premier’s decision will become effective from Feb. 15. – Bloomberg

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