What is a Debt Trading Loan?

A debt trading loan is a specialised financing product provided by banks or credit institutions to fund the acquisition of loan portfolios or receivables from other financial entities. The borrower — typically a debt purchasing company, asset management corporation (AMC), or private equity fund — uses the proceeds to buy non-performing loans (NPLs) or commercial debts at a discount, then recovers value through collection, restructuring, or resale.

Types of Debt Trading

• NPL portfolio acquisition: Purchasing discounted distressed loan books from banks
• Trade receivables purchase: Buying outstanding invoices or commercial paper
• Restructured debt: Acquiring debt of companies undergoing financial reorganisation
• Bulk loan portfolio: Purchasing aggregated pools of smaller debts

Underwriting Considerations

Lenders assess the quality of the acquired debt portfolio, the borrower's debt recovery capabilities, estimated recovery rates, collateral coverage, and legal enforceability of the debt instruments. The loan-to-value ratio is typically lower than standard commercial loans due to the inherent uncertainty in recovery outcomes.

Regulatory Environment

In Vietnam, debt trading activities are governed by Decree 69/2016/ND-CP on conditions for debt trading services. Companies engaged in debt trading must hold a specific licence and maintain minimum charter capital requirements.

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