Tan Kin Lian's Blog: Hong kong - minibond buyback proposal

Monday, October 06, 2008

Hong kong - minibond buyback proposal

http://www.thestandard.com.hk/breaking_news_detail.asp?id=7315&icid=1&d_str=20081006

Minibond buyback proposal
Financial Secretary John Tsang Chun-wah said the government has proposed that banks to buy back Lehman Brothers minibonds from customers.

''This is a way to let investors recoup some losses from their investments quickly,'' Tsang said.

The trustee of the minibonds, HSBC (0005), has agreed to disclose more information to distributors such as the value of the underlying collateral on the investment products.

Investors are unlikely to get back all their investment, he said.

Earlier today, more than 200 people who invested in the finanical products sought help from the police. The group staged a protest outside the police headquarters in Wan Chai and Democratic Party members accompanied several of them to file complaints with the Commercial Crime Bureau that salesmen had misled them.

8 comments:

Anonymous said...: The proposal was for banks to estimate the residue value of the underlying securities CDO, CDS etc., and then make an offer to the consumers. The only stated advantage is that they don't have to wait for liquidation to complete. Many experts expressed doubt, some even called it a stupid proposal. There will be no transparency in the calculation and the value may still be disappointingly low.; October 07, 2008 1:42 AM
ym said...: i think investors will be disappointed at the price banks are willing to buy the toxic waste.. cents on the dollar so that they have some up side..

banks (the creator, marketer) must compensate investors for their loss.. not merely buy back the toxic waste at low prices; October 07, 2008 9:20 AM
Anonymous said...: First thing first, what the trustees must do is to disclose fully, factually and in detail what exactly are these underlying securities, their original values and current estimated market values. It seems the investors and the public are unaware of what these underlying securities.... only simple descriptive acronyms like CDO, CDS etc.; October 07, 2008 10:30 AM
Anonymous said...: I think it has to be return near to our principle or we continue to go to FIDRC or class suit. Anything less is unacceptable. Do you think a old folk who put in $100,000 is willing to close case by taking back $50,000?; October 07, 2008 5:59 PM
Anonymous said...: Can anyone kindly enlighten me..
What and where is the asset (toxic or not) of my investment in MInibond ?
FI says there is a "chance" that the minibond sr 3 can still continue if the issuer (some Barier Finace ??) /the underlying security decided to continue. They have not defaulted. Can some organization stand in as the so called "Guarantor" for this minibond to continue?; October 07, 2008 8:40 PM
hkeric said...: http://www.mingpaonews.com/20081007/mta.htm

迷債失控3周有內情業界怨政府要銀行冒險／李先知 2008年10月7日

【明報專訊】雷曼申請破產距今已3周，其間不少雷曼債券持有人到處奔走，情教人同情，很多人都在問﹕為何港府遲遲未能出招，令事件愈鬧愈大，甚至到了有失控之險。官場耳語出了如下的解說﹕

第一周(9月14日至21日)﹕港府當時已知道有迷債存在，不斷找匯豐想知道迷債背後的資產情，但當時只知道迷債的抵押品與雷曼分開處理。由於迷債信託人是匯豐美國信託部，而迷債的抵押品又另有信託人，是紐約銀行，港府跟分銷銀行一樣，完全不能直接從信託人手上取得有關迷債的資料。

第二周(9月22日至28日)﹕港府財經事務及庫務局官員，透過本身網絡，查出29個雷曼迷債系列的抵押品是什麼，初步知道除了4個抵押品為雷曼票據的系列，肯定「渣都冇」之外，其他迷債還是有機會取回一些本金。

上周初﹕29個迷債系列之中，其中一個系列下次派息日為明年3月，即有迷債事主要等到明年3月底才知道自己的投資剩下多少。港府認為，這安排政治上不能接受，所以一直希望匯豐作為迷債信託人，可以行使酌情權，宣布所有迷債系列提早清盤。

但至上周中段，匯豐告知政府，基於要遵守信託契約的條文，不可能提早把迷債提早清盤。

上周五(10月3日)﹕在港府力促下，匯豐終於把29個迷債系列的抵押品清單交給港府。拿到清單後，港府確認了有不少迷債的抵押品仍然值錢，財經事務局長陳家強遂於當日下午向財政司長曾俊華建議，要求銀行回購迷債。

上周六﹕當天下午，港府約見銷售迷債最多的中銀香港負責人，向後者提出回購建議。官場耳語透風謂，該行負責人也是在這次會面中，才首次獲悉29個系列的抵押品是什麼東西及值多少錢。中銀初步的反應正面，但說仍要時間想想。

到了昨天，陳家強再向曾俊華匯報，並由曾財爺親自拍板決定「去馬」。但在拍板的一刻，包括中銀在內的分銷銀行，仍然未有一家表示願意「落疊」。

港府官員指出，今次回購方案的構思是建基於兩個大原則。第一，不用公帑解決問題；第二，按市場操作來進行。港府中人認為，這個方案算是一個公平的方案，銀行要承擔的風險亦有限。

但銀行界人士則有不同看法，他們認為政府為了盡快「救熄政治風暴」，要分銷銀行承擔所有的風險，因為按照政府的建議，清盤後所得，若高於回購價，銀行是需要把差價退給事主，若清盤所得是低於回購價，銀行卻不能向債券持有人取回差額。此外，現時要銀行出一個回購價也不容易，因為匯豐作為信託人所提供的價，只是雷曼倒閉前一天的估價，即9月12日的價格，過去3個多星期以來，市場情緒變化已很大，因此，政府昨日聲稱事主可以取回的百分比，隨時會因為市場逆轉而達不到，故此業內人士批評政府不必要地提高了原債券持有人的期望，令事情將來更難解決。

文／李先知; October 07, 2008 8:54 PM
Anonymous said...: There are some hope for Lehman MiniBond

No news for Merill Lynch Jubilee Series 3 & DBS High Note 5 yet.

SINGAPORE -(Dow Jones)- Singapore's central bank said Tuesday that Lehman Brothers Holding Inc. (LEH) has defaulted on an issue of bonds sold to local investors.

The Monetary Authority of Singapore said in a statement that the trustee for the Minibonds will consider finding a counterparty to replace Lehman Brothers.

The trustee said if it doesn't find a counterparty arrangement it will liquidate the bonds and pay the proceeds to bondholders.

Holders of the Lehman bonds include retail investors who have asked the central bank for help in recouping their investments.

-By John Jannarone, Dow Jones Newswires; john.jannarone@dowjones.com; 65 6415 8153; October 08, 2008 8:06 AM
Anonymous said...: just received a note from Jubilee Finance and Merrill Lynch with the calculation of the final liquidation value of the Jubilee Series 3.

Jubilee Series 3 Notice to Investors

First of all, how it works is that in the case of any default, you (the noteholder), will give up the underlying security of your Jubilee Notes and take over the bonds of the default entity.

The bonds of the default entity (in this case Lehman Brothers), will be sold.

These were sold for about $4.7 million, representing 18% of the original value of the notes.

There is also a need to deduct any costs involved in unwinding all the swap positions. This works could to be $2.6 million.

The last adjustment that needs to be made is in the value of the underlying securities. Any drop or gain in the value of the underlying securities will have to be offset against the proceeds.

In this case, the underlying securities had a market value of only $5.4 million out of the original principal of $26.3 million. This means a markdown of almost $20.8 million.

4.7 - 2.6 - 20.8 = -18.7 million

Jubilee Series 3 noteholders will therefore get back nothing.

This looks like a worse deal than just holding the Lehman bonds directly. Bond holders were getting a coupon of 5.625% and when Lehman defaulted, they could still get back 18% of their capital.

Jubilee noteholders had to undertake a lot more risks and were not being paid a lot more than pure bond holders.; October 08, 2008 7:11 PM