A lot of businesses have to borrow money on the black market at exorbitant high interest rates to pay their due debts. However, debts generate bigger debts, and businesses have been caught in a vicious circle.
Incurring the debts of up to hundreds of billions of dong, having nothing left after selling all the assets to get money for debt payment, a lot of businesses have quietly run away or dispersed and hidden their assets.
The heaped up debts
The private enterprise specializing in making plywood products for export in Bien Hoa 2 Industrial Zone in Dong Nai province has no director for many years. Nearly 100 workers of the enterprise still have not got their salaries.
V, the younger brother of B, who was once the director of the company, now acts as the temporary manager of the company, said that in 2011, the enterprise decided to set up two more workshops to increase the productivity.
Unable to access bank loans, the enterprise decided to seek capital on the black market. It borrowed 1.6 billion dong at the sky high interest rate of 7 percent per month to expand the workshops and buy more machines.
However, as there were few orders, the production got stagnant; the enterprise did not have money to pay the debts with the exorbitant high interest rate. As a result, the enterprise’ owner had to give two cars to the creditors.
As creditors have been chasing for debt collection, B had to escape some days ago, leaving an increasing huge debt. Meanwhile, the company’s assets have nearly got exhausted, and equipments have been left untouched.
“The only thing we can do now is to keep production at a moderate level to get money to feed workers’ mouths,” V said.
At TT Garment Company in Hoc Mon district of HCM City, the company’s workers put chairs at the entrance to the company and kept watching over the activities of the company’s managers on April 9. The decision was made after some workers discovered the attempts by the managers to disperse and hide the company’s assets.
Bui Thi Tuyet Nhung, Chair of the Hoc Mon district Labor Federation, said that the company owed 400 million dong in workers’ salaries. However, after the federation’s intervention, the owner of the company has paid workers already. However, it’s still unclear about the debts incurred by the company to other creditors.
When reporters came back to the company on the afternoon of April 13, there was nothing left. The machines and equipment at the workshops have been carried away for sale.
XB, a scrap material workshop in Bien Hoa City of Dong Nai province, once faced the anger of creditors some days ago.
In early 2009, T, after realizing the big income from scrap material, borrowed one billion dong from a bank and 500 million dong from other sources to implement his production plan.
The big debt plus the unprofitable business both have led to the insolvency. T’s house, worth 1.5 billion dong has been distrained by the bank. The only asset left – a car – is not valuable enough to pay the heaped debts.
The owner of a garment company in HCM City said that bargaining away equipment, mortgaging assets for high interest rate loans are the things that most of unprofitable businesses have to do now, because they have been pushed against the wall.
As the lending interest rates are exorbitant, borrowers cannot pay debts, and they accept to seek their mortgaged assets falling into the hands of creditors. A lot of businessmen have lost their homes and intimidated.
Source: Tien phong/ VNN
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