Vietnam Airlines today [July 7] signed a credit contract worth VND4 trillion (US$173 million) with three local commercial banks to help the national flag carrier cope with the Covid-19 impacts.

Overview of the signing ceremony. Photo: Vietnam Airlines

The loan came from the refinancing fund of the State Bank of Vietnam (SBV) worth the exact amount and at a 0% interest rate for Vietnam Airlines’ lenders, including Southeast Asia Commercial Bank (SeABank), Vietnam Maritime Commercial Bank (MSB), and Saigon-Hanoi Commercial Bank (SHB).

Last year, the National Assembly (NA) ratified a resolution that allows the Government to work out a VND12-trillion (US$522 million) rescue package for Vietnam Airlines.

The airline, in which the Government currently holds an 86.19% stake via the Commission for State Capital Management (CSCM), also gets the permission to sell additional shares worth VND8 trillion (US$345.68 million) to existing shareholders to raise its registered capital.

At the contract signing ceremony, the Chairman of Vietnam Airlines Group Dang Ngoc Hoa stated the capital would be used to pay overdue debts and operational costs.

“Vietnam Airlines does not intend to use the loan amount for investment or procurement activities,” Hoa said.

In line with the Government’s support, Hoa noted Vietnam Airlines has been pushing for restructuring by scaling down operation and optimizing costs to overcome the Covid-19 crisis, which has caused severe losses to the aviation and tourism industries.

“We expected to finalize the required legal steps to raise registered capital by VND8 trillion (US$345.68 million) by selling shares to existing shareholders by the late third quarter,” he added.

The Ministry of Planning and Investment (MPI) previously estimated an overdue debt of VND6.24 trillion (US$272 million) could lead to the bankruptcy of Vietnam Airlines.

Given the severe Covid-19 situation in Vietnam, the airline estimated losses of VND10 trillion (US$436 million) in the first half of 2021.