The cost of insuring debt against default Vietnam rose to its highest level in 17 months

The cost of insuring debt against default Vietnam rose to its highest level in 17 months international lenders wait for the state shipping company for a refund of 60 million U.S. dollars loan due today.

The credit-default swaps on government debt of Vietnam were quoted at 295 basis points from 13:18 in Singapore, according to Royal Bank of Scotland Group Plc. That's the highest since July 17, 2009, prices of provider CMA data show.

Moody's Investors Service downgraded the Southeast Asian nation of credit to B1 from Ba3 on December 15, citing the risk of balance of payments crisis, and stressed "debt overhang" in Vietnam Shipbuilding Industry Group, known as VINASHIN. The company, which the government says it had a debt of around 86 trillion dong ($ 4.4 million) from June, will not be able to repay the loans due to lack of funds, President Nguyen Ngoc Her said the website of the Vietnam Economic Forum last week.

VINASHIN If you do not pay, will "make it more expensive for any entity Vietnamese government-owned or otherwise, to obtain financing abroad," said Jonathan Pincus, economist at Harvard's Kennedy School in Ho Chi Minh in a telephone interview. "People in government do not seem to be thinking long term about the implications this has for the financial credibility of Vietnam."

Swaps credit-default pay the buyer face value if a borrower defaults on its obligations, less the value of the defaulted debt. A basis point equals $ 1,000 a year in a deal to protect $ 10 million of debt. The contract closed at 287 basis points on December 17, capping its biggest weekly rise since August 27, CMA prices show.

Dollar bonds

Vietnam dollar bonds have fallen 5.7 percent this month, HSBC Holdings Plc indexes show. The debt lost 2.4 percent in November, the worst monthly performance since a 4.9 percent drop in November 2009, the indices show.

The nation of one billion U.S. dollars at 6.75 percent by January 2020 bonds were unchanged at 102.5 cents on the dollar to yield 6.382 percent today, the lowest since June 28.

The International Monetary Fund said this month that Vietnam needs a "coherent package" of measures including higher interest rates to restore the credibility of monetary policy and inflation slow.

VINASHIN the verge of collapse indicates a "systemic failure" in the regulatory oversight of the SOEs, according to the Asian Development Bank.

Loan VINASHIN

VINASHIN hired Credit Suisse Group AG to help organize a $ 600 million, seven-year loan in December 2008. A bank's steering committee, comprising representatives of the Swiss bank, Standard Chartered Plc and hedge fund Elliott Advisors Ltd., was established to negotiate with the company.

KPMG LLP, was appointed to provide advice and support to VINASHIN, while the law firm Allen & Overy LLP was hired by the creditor group as legal advisors.

Edward Middleton, KPMG's partner in Hong Kong, in charge of restructuring services, declined to comment in an e-mailed response to questions. David Kidd, Partner, Allen & Overy, also declined comment.

VINASHIN representatives were not immediately available by telephone today. Credit Suisse in Hong Kong spokesman Adam Harper and a public relations firm representing Elliott Advisors both declined comment.