Bank reduces interest rate on loan of 237 billion VND for Quoc Cuong Gia Lai

Ms. Nhu Loan revealed that the reason the bank reduced interest by 237 billion VND was because the business committed to paying off both principal and interest.

On June 29, at the 2017 annual general meeting of shareholders of Quoc Cuong Gia Lai Joint Stock Company (stock code: QCG), Ms. Loan spent a lot of time answering investors' questions.

In her conversation with shareholders, Ms. Loan especially expressed her frustration at having to endure many rumors about BIDV Bank Quang Trung branch "giving" QCG more than 237 billion VND, which was an interest-bearing debt.

One of the housing areas of Quoc Cuong Gia Lai.

Chairman of Quoc Cuong Gia Lai explained: "Credit institutions are also business entities, banks do not just give money to businesses for free. To get a reduction in interest, in return, the company must bet on many things, straining to pay off principal and interest."

Ms. Loan said that at the end of 2016, QCG submitted a document to BIDV Quang Trung requesting a reduction in interest and the full repayment of the loan used to finance the company's Phuoc Kien project (Nha Be district, Ho Chi Minh City). Accordingly, QCG proposed a plan to pay off the entire principal loan on December 31, 2016 and the interest debt before March 31, 2017 and requested a 50% reduction on the interest payable.

At the end of 2016, QCG was approved by BIDV Quang Trung to request interest exemption and reduction according to the proposed plan to pay principal and interest. However, to get the interest reduction as requested by the enterprise, BIDV required QCG to pay all debts including social housing debts even though the 5% interest has not yet come due.

As of March 31, 2017, QCG has completed the payment of the entire principal of VND 1,376.7 billion and the interest due of VND 251.9 billion. Therefore, the enterprise is entitled to a reduction in interest of VND 237.1 billion, including the interest payable as of December 31, 2016 of VND 219.9 billion.

“To handle QCG’s large debts at that time, I also lost sleep,” Ms. Loan confided. Although the bank is a creditor, it also has certain worries. She analyzed that if the Phuoc Kien project expires and is not yet built, it could be revoked, and the fate of the project and related partners is unknown.

The situation will be extremely deadlocked for both QCG and BIDV if the banks do not reduce interest rates because the project cannot be sold even if it is foreclosed to deal with bad debt, and no one dares to buy the unfinished project.

Chairman of Quoc Cuong Gia Lai said that to reduce the interest of 237 billion VND, the company had to bet on many things and try hard to prepare money to pay the principal and interest. Photo: QCG

QCG’s Chairman also revealed to shareholders about the cash flow arrangement to pay off the trillion-dollar debt. Accordingly, thanks to a Hong Kong partner who was keen to buy the Phuoc Kien project, the company advanced 50 million USD. In addition, the company also took advantage of selling goods to collect the money, so the debt was promptly resolved.

However, Ms. Loan confirmed that she has not yet signed a contract to transfer this "favorite child" because there are still many binding conditions that need to be further negotiated.

Phuoc Kien residential area is one of QCG's key and largest projects in the past 10 years. Ms. Loan has repeatedly affirmed to investors that despite being heavily in debt, she still wants to keep Phuoc Kien because the project is her "brainchild" and the passion of her entire business life.

During the process of legal preparation and compensation for site clearance for the project, the company knocked on the doors of many credit institutions to borrow capital. At BIDV Bank Quang Trung branch, QCG incurred 2 loans, worth nearly 1,352 billion VND. The current interest rate is 10.9%, previously there were years when the interest rate was 17-21%/year. At the end of 2016, the inventory value of the Phuoc Kien project reached more than 4,200 billion VND.

According to VNE