The bank signed an agreement yesterday under which the loans would be assumed by the Debt and Asset Trading Co (DATC), a State-owned enterprise under the Ministry of Finance which specialises in trading in discounted loans and restructuring insolvent State enterprises.

The move is seen as a major step towards improving Agribank's bad debt ratio prior to equitising.

The loans assigned to DATC were made to the Son La and Kon Tum sugar processing companies, two out of 26 State owned enterprises owing past-due loans to Agribank.

"The loans to these companies have remained bad debt of Agribank for many years and have seriously affected the business results of the bank," said a senior Agribank official at yesterday's signing ceremony.

"I truly believe that selling these loans will help us restructure our loan portfolio in order to hasten equitisation."

"The two companies have been standing on the verge of bankcrupcy," said DATC general director Pham Thanh Quang.

"Within the loan acquitistion, we plan to restructure the financial situation of these companies and call for investment from strategic investors."

Agribank did not release any further information about the agreement.

Earlier this decade, State-owned Agribank extended credit to sugar processing companies of up to VND3tril ($187.5mil) in order to help them achieve a national sugar production target of one million tonnes.

The loans quickly turned into non-performers, however.

DATC has since bought up loans made to 10 sugar processing companies and tried to help them reorganise into private companies in accordance with an order from the Prime Minister.

DATC bought up the debts of Sadico, for instance, oversaw a restructuring of the company and helped it attract VND4bil ($250,000) in capital through a share auction in May of this year.

DATC announced it would continue negotiating with other financial institutions to buy up discounted loans.