A series of restructuring decisions
At the meeting held from May 18-20, the Board of Directors of Hoa Binh Construction (HBC) approved a series of important decisions regarding personnel and finance. These decisions are expected to generate trillions of VND for HBC after overcoming a period of financial and personnel crisis.
Notably, Chairman Le Viet Hai directed the purchase of 75% of the capital contribution of Thanh Ngan Real Estate Company Limited, thereby achieving 100% ownership of the 127 An Duong Vuong project (Ward 10, District 6, Ho Chi Minh City).
The total amount spent on this project is 564 billion VND, equivalent to the amount raised from the issuance of 47 million HBC shares. Hoa Binh will issue 47 million HBC shares at a price of 12,000 VND/share (1.5 times higher than the stock exchange price on the date the resolution was issued).
The 127 An Duong Vuong project has a total area of 15,394.7 m2 and has been granted a land use right certificate. Of this, 6,279.6 m2 is allocated for high-rise commercial housing and services, and 6,567.5 m2 is designated for education . A total of 218 billion VND has been paid into the state budget. Land prices around An Duong Vuong street are currently trading above 100 million VND/m2.
According to Mr. Le Viet Hai, this is a promising project that will generate significant revenue and profit for the group.
Two new strategic shareholders, Pham Quang Hang and Mai Huu Thung, purchased 47 million HBC shares. The total number of shares these two investors bought is exactly equal to the number of shares held by Mr. Le Viet Hai. Mr. Hang and Mr. Thung agreed to buy at a price 50% higher after learning about Hoa Binh's difficult financial situation and understanding its promising strategy for developing overseas markets.
In addition, Hoa Binh Construction also approved the application and transaction for credit granting with Vietnam Maritime Bank. At the same time, the management approved the repurchase of all shares of Mr. Le Viet Hai in Pax International Company and the recovery of outstanding debts.
According to Chairman Le Viet Hai, with these strategic decisions, Hoa Binh will soon stabilize its business situation, overcome difficulties and challenges, and regain its former position in the not-too-distant future.
Furthermore, Mr. Hai stated that out of a total of 21 lawsuits regarding delayed payments, 10 cases have received court rulings, and Hoa Binh has won all of them. In those cases, the principal debt recorded in the accounting books is 829 billion VND. The total amount the defendant must pay to Hoa Binh, according to the court ruling, amounts to 1,223 billion VND, including late payment interest and other incurred costs, which is 47.5% higher than the original amount.
Has the civil war in Hoa Binh ended?
Currently, the total amount of debt recovered is 593 billion VND, with 630 billion VND remaining to be collected from the 10 successful lawsuits. Mr. Hai added that the real estate market will recover in the near future, so the debts will gradually be processed, with a recovery rate of no less than 100%. The amount recovered will increase by at least 15% of the overdue principal debt. In HBC's business history, no debt in the financial statements has ever needed to be written off by the Board of Directors due to uncollectible debt.
On the other hand, applying international accounting standards, Hoa Binh will re-evaluate its assets in the near future because the figures recorded in its accounting books are outdated. For example, the house at 235 Vo Thi Sau, Hoa Binh's former headquarters, was recorded in the books at only 5.6 billion VND in 2000, but now it cannot be less than 100 billion VND. Similarly, the house at 233 Vo Thi Sau and the land plot at 1C Ton That Thuyet, District 4, Ho Chi Minh City are also outdated.
Regarding the remaining value of machinery and equipment, it can be affirmed that it is much higher than the value recorded in the accounting books. According to the financial report as of December 31, 2022, the total investment in machinery and equipment to date is VND 2,208 billion, with VND 1,305 billion already depreciated, leaving only VND 903 billion (equivalent to only 40% of the original cost).
In fact, the scaffolding system is not significantly rusted or damaged. The cranes, hoists, concrete pumps, etc., are all in good working condition. Due to inflation, the current purchase price of new equipment is always higher than the original purchase price of these assets.
In the near future, Hoa Binh Construction will adjust its equity capital after issuing a capital increase and revaluation of assets. This increase in equity capital will help Hoa Binh secure its credit limits, significantly improve its financial capacity to overcome immediate cash flow difficulties, and enable it to settle all outstanding debts to suppliers and subcontractors.
On May 18th, HBC appointed Mr. Le Van Nam (1976) as the General Director of Hoa Binh Construction (HBC) effective June 1st. Mr. Nam previously held an important position at HBC before moving to SCG Construction Group as General Director for a period and returning to HBC as CEO starting June 1st.
HBC also approved the dismissal of Mr. Truong Quang Nhat from his position as Deputy General Director at his own request. Simultaneously, Mr. Nguyen Khanh Hoang (born in 1982) was appointed as Deputy General Director effective June 1st.
Through the removal of Mr. David Martin Ruiz from his position as a member of the Board of Directors for the 2022-2027 term, following his resignation. Mr. David Martin Ruiz's resignation will be considered and approved at the 2023 HBC Shareholders' Meeting.
Previously, HBC experienced internal conflict within the company. The internal conflict at Hoa Binh Construction escalated at the beginning of 2023, causing many to worry that Vietnam's leading brand could face a disastrous decline.
The civil war is complicated as both sides are considering suing each other in the relevant authorities, even to the point of "examining the criminal liability of individuals."
The dispute began on December 14, 2022, when the Board of Directors passed a resolution accepting Mr. Le Viet Hai's resignation as a member of the Board of Directors, and simultaneously elected Mr. Nguyen Cong Phu as Chairman of HBC to replace Mr. Hai, and appointed Mr. Hieu (Mr. Hai's son) as General Director of HBC effective January 1, 2023.
However, on the evening of December 31, 2022, Hoa Binh Construction announced the postponement of the resignation of Mr. Le Viet Hai from the position of Chairman of the Board of Directors, effective January 1, 2023; the resolution also postponed the appointment of Mr. Le Viet Hieu as General Director.
On the morning of January 1st, several members of the Board of Directors, including Mr. Nguyen Cong Phu, Mr. Le Quoc Duy, Mr. Duong Van Hung, and Mr. Albert Antoine, issued a document refuting Mr. Le Viet Hai's statement on December 31st, 2022, which accused the HBC Board of Directors meeting of not having the required number of members present.
However, recently, a number of leaders in the opposition to Mr. Le Viet Hai have successively withdrawn from HBC.
1. The Board of Directors approved the sale of the entire capital contribution of Hoa Binh Innovation Center One-Member Limited Company (HBIC) for 167 billion VND. 127 billion VND has already been spent on the project, leaving a profit of 40 billion VND.
2. Through the purchase of the remaining 75% of shares in the 127 An Duong Vuong project (Ward 10, District 6, Ho Chi Minh City) from Thanh Ngan Company, HBC will achieve a 100% ownership stake. The price at which HBC shares were sold to this project was 12,000 VND/share (1.5 times higher than the current price on the stock exchange).
3. Through the implementation of the credit application and transaction with Vietnam Maritime Commercial Joint Stock Bank. Maximum short-term credit limit of VND 2,000 billion. Of which, maximum loan limit of VND 1,000 billion; maximum guarantee limit of VND 1,000 billion. Purpose: to supplement working capital, guarantee for business operations, maximum term of 12 months from the date of signing the Credit Agreement for the issuance of 5 million shares to Sanei.
4. Through an agreement to transfer land use rights between Mr. Le Viet Hai and Ms. Bui Ngoc Mai for 3 plots of land with a total area of 7,218.6 m2 located on Phan Van Hon Street, Tan Thoi Nhat Ward, District 12, Ho Chi Minh City, for a price of 120 billion VND.
5. Through the acquisition of all of Mr. Le Viet Hai's shares in Pax International Company based on his actual contributed capital (138 billion VND).
In all these transactions, Hoa Binh will not use cash but will only issue shares and recover advances previously used for business purposes. Recovering these advances will provide HBC with more assets to enhance its financial capacity.
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