A land plot worth trillions of VND, an operating factory or a dominant stake in an enterprise can all be very valuable assets. But when Vietnamese enterprises borrow capital from foreign banks, the economic value of the asset does not necessarily mean the ability to use the same asset to secure the loan.
The transaction took place nearly two decades ago, and the laws governing foreign loans and secured transactions have changed dramatically since then.
Because the problem is not only "can assets in Vietnam be mortgaged to foreign lenders?". For each type of property, it is also necessary to determine who is entitled to receive security, how the security right is established and registered, how it can be handled when the borrower violates and finally, whether the proceeds can be transferred to overseas lenders or not.
The loan of 3 million USD and 20% of the shares were used as collateral
In 2007, Luks Land International Limited ("Luks Land"), a company incorporated in the British Virgin Islands, intends to establish a joint venture company with Indochine Joint Stock Company ("Indochine"), a Vietnamese enterprise, to implement a real estate project in Ho Chi Minh City[1].
The project involves a land area of about 159,737 m² in Truong Thanh Ward, District 9, Ho Chi Minh City. According to the expected structure, Luks Land owns 95% and Indochine owns 5% of the joint venture company. The total expected investment capital of the joint venture is 30 million USD.
But before the joint venture was established, Indochine needed money to carry out compensation work for the people who were using the land. The parties therefore designed a $3 million loan from Luks Land to Indochine. This money was only used for compensation purposes related to the land and was then expected to be converted into part of Luks Land's investment in the joint venture.
The remarkable point lies in the way the loan is secured. According to the publication document, a shareholder owning 20% of Indochine's capital commits to use all his rights and interests in this 20% ownership to ensure that Indochine fulfills its obligations. In particular, the structure also has a Vietnamese company, Hanh Phuc House Joint Stock Company, participating as a Security Agent[2] for Luks Land, while Luks Land is the secured party and Indochine is the borrower.
The transaction took place nearly two decades ago, and the laws governing foreign loans and secured transactions have changed dramatically since then. But it does provide a very remarkable practical example that even if the funding comes from abroad, the solution is not necessarily to try to put all of the project's assets in a mortgage contract directly to the foreign lender. The parties may have to find a security structure that is more suited to the nature of each asset and the objectives of the transaction.
The most valuable asset is not necessarily the best collateral
A notable detail in the above transaction is that the project is associated with nearly 160,000 m² of land, but the announced guarantee for the $3 million loan is 20% of the ownership in Indochine.
According to current law, land use rights are subject to a separate legal regime. The fact that an enterprise has the right to use land does not mean that the enterprise is free to mortgage that right to any subject. It is necessary to determine the type of land, the form of land use, the origin of the use right, the fulfillment of financial obligations and especially which subjects are allowed to receive mortgages.
Meanwhile, shares, contributed capital, machinery, receivables or other property rights have other legal mechanisms.
Therefore, in an international loan, the first thing should not be to make a list of assets with the greatest value. The parties need to determine which assets have both economic value, be able to create appropriate security measures and have feasible solutions when legal risks occur.
That's why large financing deals often form a security package instead of relying on a single asset.
Security package is more than just a collection of mortgage contracts
A security package in financing, corporate acquisitions, or syndicated loans may include shares or capital contributions, machinery and equipment, receivables, rights arising from important contracts, insurance money, bank accounts and, where legal conditions are met, land use rights or land-attached assets.
The US$3 million loan in the above case is not only accompanied by a guarantee for 20% of the ownership in Indochine. The disbursement is also tied to the conditions accompanying the disbursement before the disbursement. Before the loan is provided, Indochine must ensure that Luks Land receives the signed Guarantee Agreement, the approval of the shareholders in relation to the signing of the security documents, land use right certificates and documents proving the completion of compensation for the relevant land portions.
The loan is also limited in purpose: Indochine commits to only use the loan to compensate land users. If this commitment is violated, Luks Land has the right to request immediate repayment of the loan and the agreed interest. Thus, the lender's security does not only come from collateral.
M&A practices are driving cross-border secured transactions
If in the past collateral mainly served conventional commercial loans, now the biggest driver comes from M&A deals.
In many acquisitions of Vietnamese enterprises, foreign banks finance the buyer through acquisition financing.[3]
To secure a loan, the borrower often has to simultaneously mortgage the target business's shares, bank accounts, debt collection rights, important commercial contracts, assets of the business, and in many cases, land use rights. This makes the construction of the security structure an integral part of the M&A transaction.
Many deals have to be adjusted many times just because they find that some assets are not eligible for registration or the transfer of the right to handle assets will face problems when enforced.
For foreign banks, difficulties come not only from the sale of assets but also from compliance with regulations on foreign exchange, remittances abroad, tax obligations arising when handling assets, and legal proceedings if the mortgagor does not cooperate. Some types of assets are also under the control of state agencies or need to meet the transfer conditions before they can be handled.
Therefore, in many international transactions, the parties spend more time building an asset disposal mechanism than negotiating the loan interest rate. Practical enforceability is the factor that determines the value of collateral.
From a business perspective, access to international capital should not only be seen as an interest rate negotiation process.
Big deals show that the market has changed
Recent years have shown that international banks are increasingly actively involved in financing energy, industrial real estate, infrastructure, logistics, aviation, manufacturing and M&A projects in Vietnam.
Many syndicated loans have the participation of international financial institutions such as HSBC, Standard Chartered, DBS, MUFG, SMBC, Mizuho, UOB, ING, ANZ and many international development banks. The common point of these transactions is that most of them build a very tight guarantee structure, combining mortgage contracts under Vietnamese law with financial documents according to the standards of the International Loan Market Association (LMA).
This trend shows that the international financing market for Vietnamese enterprises is increasingly approaching international practices, and at the same time requires businesses and consultants to understand both Vietnamese law and international financial structures at the same time.
What do businesses need to prepare?
From a business perspective, access to international capital should not only be seen as an interest rate negotiation process.
Right from the stage of preparing for the transaction, enterprises need to review the possibility of using each type of asset as collateral, assess the legal status of ownership, check transfer restrictions, consider the obligation to register secured transactions and plan handling if infringement events arise.
For M&A or project finance transactions[4], the construction of the collateral structure should be carried out in parallel with the legal due diligence process instead of reaching the stage of signing a credit contract.
Practical experience shows that many transactions have to be prolonged or adjusted in structure not because the lender changes its requirements, but because the property intended to be used as security does not fully meet the legal conditions or cannot be handled effectively when necessary.
Conclusion
In the context of Vietnamese businesses becoming increasingly dependent on international capital, assets in Vietnam will continue to serve as the foundation of cross-border financing transactions. Current legislation has opened a wide enough corridor for foreign banks to receive collateral, but the real value of the security right lies not in the conclusion of the contract, but in the ability to register, manage and enforce that right when the risk occurs.
For businesses, the important lesson is no longer to question whether assets in Vietnam can be mortgaged to foreign banks, but how to design a guarantee structure that is both in accordance with Vietnamese law and meets the standards of the international financial market. This will be a decisive factor in the ability to raise capital, reduce financial costs and improve the competitiveness of Vietnamese enterprises in the period of deeper integration with the global capital market.
[1] https://www1.hkexnews.hk/listedco/listconews/sehk/2007/0919/ltn20070919209.pdf, accessed on 01/09/2026.
[2] Security Agent in banking activities is an organization or individual authorized to hold, manage and execute collateral (such as mortgages, pledges) on behalf of a group of banks or syndicated lending institutions.
[3] Acquisition financing is the source of capital or financing solutions that a business or individual uses to acquire another company, business division, or assets.
[4] Project finance is a method of granting medium and long-term credit to a specific project, in which debt repayment is based entirely or primarily on future cash flows generated by the project itself.
