*

Vingroup's shares close to multi-year lows, fall most

among top

Vietnam firms

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Vingroup market cap has nearly halved since VinFast's

Nasdaq

listing

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Agencies rate as junk the debt of Vingroup's most

profitable

unit

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Vingroup says it remains committed to VinFast's growth

By Francesco Guarascio and Phuong Nguyen

HANOI, Jan 23 (Reuters) - Vietnamese conglomerate

Vingroup is facing renewed scrutiny on its strategy of

backing loss-making electric vehicle maker VinFast, with

its shares near multi-year lows as foreign investors sell and

its borrowing costs rise.

Pressure on the company, a household name in Vietnam with

businesses spanning autos, real estate, retail and resorts,

intensified this month as Moody's and Fitch gave 'junk' ratings

to the debt of Vingroup's most profitable unit, real estate firm

Vinhomes, as well as to its planned $500 million

international bond sale.

The two agencies said the speculative-grade ratings were due

to Vinhomes' links to Vingroup.

This year "may become indicative of Vingroup's broader

financial health," said Leif Schneider, head of international

law firm Luther in Vietnam.

"Vingroup may face further financial erosion" if VinFast's

performance does not improve, he said, adding that scaling back

Vingroup's support to subsidiaries could mitigate financial

strain.

The conglomerate and its founder, Pham Nhat Vuong, poured

$13.5 billion into the electric automaker as of October in loans

and grants, and promised another nearly $3.5 billion in

November, despite concerns about the bet investors raised at the

company's last two annual shareholders' meetings.

Vingroup's market capitalisation has shrunk by nearly half

to about $6 billion since VinFast's listing in August 2023. Over

the past year, its shares fell 6.6%, the most among the 10

largest listed companies in Vietnam, and underperforming the

7.5% rise for the Vietnam market, according to LSEG data.

Its shares traded in December at their lowest level since

2017. They have recovered slightly since but were still close to

that multi-year low level this week.

"The biggest challenge for Vingroup remains VinFast," said

Nguyen The Minh, head of research at Yuanta Securities Vietnam.

Vingroup, however, is not backing off.

"Vingroup has been and will continue to support the

subsidiary's development," it told Reuters on Wednesday,

reiterating its long-standing commitment to Nasdaq-listed

VinFast.

Strong expected growth for its units this year would attract

investment in the company, Vingroup said.

BORROWING COSTS

So far, investors, especially from overseas, have been

unconvinced. Since VinFast's listing, the value of foreigners'

combined holdings in Vingroup has dropped by nearly 60% to 15.7

trillion dong ($620.5 million), faster than local investors',

according to stock market data updated to last week.

Among foreigners who fully divested their holdings in the

conglomerate last year are investment vehicles of BlackRock ( BLK )

and DWS, while JPMorgan's ( JPM ) asset

management unit nearly halved its stake to 0.13%, according to

LSEG data.

Vingroup's largest foreign investor, South Korean

conglomerate SK Group, is planning to sell by

mid-February about one-fifth of its 6% holding as part of a

possibly broader divestment plan in Southeast Asia.

Vingroup said foreigners' net selling was a wider trend in

Vietnam and Southeast Asia, driven largely by high interest

rates in the United States.

VinFast lost nearly $2 billion in the first three quarters

of last year, latest data show, but is narrowing its losses as

revenue grew thanks to car sales having exceeded its

revised-down target last year.

Vingroup's revenue and profits rose in the first nine months

of last year compared to the same period in 2023, driven by the

sale of assets.

However, Vingroup's borrowing costs are rising steadily. In

May, it issued two-year bonds that paid 12.5% interest, above

the average 10.6% in 2023 and 9.6% in 2022 for slightly longer

maturities.

Vingroup is not rated, but Fitch estimated earlier in

January that its debt was expected to be close to risk levels

for Vinhomes' ratings "due to rising investments in the group's

automaker, and our expectations of a sustained operating cash

burn".

"Consolidated net debt/net property assets at Vingroup is

expected to be above 55% over the short term," Fitch said,

noting that if it moved beyond 60% on a sustained basis, that

could lead to the downgrade of Vinhomes' current rating, making

its debt costlier.

Vingroup said its debt remained at stable levels.

Vietnamese lender Techcombank, which is one of

Vingroup's largest creditors, did not reply to a request for

comment.

Despite having a manageable, low debt, "Vinhomes' credit

quality is constrained by its growth ambitions and linkages with

its parent, Vingroup," Moody's said.