Friday, October 03, 2008

Merill Lynch Jubilee 3

Dear Mr Tan,

Below is the official notice from Merrill Lynch on the Jubilee 3. It's devastating to for those who have invested in this instrument.

I have read your blogs and the various reasons for people to seek better yielding products because of the extremely low savings and fixed deposit rates.

People who sought after fixed income products are normally adverse to high risk. It's not because of greed. Any sane person would want their savings to have higher returns to hedge against the mounting inflation. Products like Mini Bonds, Jubilee 3,
High Notes 2/5 & Pinaccle notes all come under the fixed income instruments. If there were to be other fixed income products which are straight forward to understand, I believe these risk adverse investors would rather park their money there, including myself. Government bonds are beyond reach of the ordinary because of the high minimum amount required.

Sophisticated structured products inevitably filled the vacuum. Keeping our money under the pillow or savings banks will be foolish if we were to take a leaf from the
famous Rich-Dad-Poor-Dad's aurhor, Robert K. What alternatives do we have when these glossy products roll out of the creative mills of banks?
Not surprisingly, many of us will take the bite.

Please help publish the ML Jubilee 3 in your blog for comments. It seems that there is no recourse at all based on the way it's worded.

Thank You Very Much!

Best Regards

Dear All

Please see the latest official word from Merrill with regards to Jubilee 3.

Q1. What is the status of the Notes?
Lehman Brothers Holdings Inc., (“Lehman”) being one of the Reference Entities, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on 15 September 2008. This filing constitutes a Credit Event under the terms and conditions of the Notes. The Swap Counterparty has submitted a Credit Event Notice to the Issuer on or about 23 September 2008.

Q2. What happens next to the Notes?
The Issuer will redeem the Notes early on the Credit Event Redemption Date which shall occur no later than the 30th London, Singapore and New York Business Day after the date on which the Credit Event Notice was delivered by the Swap Counterparty to the Issuer. In addition, the Notes will cease to bear interest with effect from the 23 June 2008, being the Interest Payment Date immediately preceding the date of delivery of the Credit Event Notice

Q3. How will the Credit Event Redemption Amount be calculated?
The Credit Event Redemption Amount to be determined by the Calculation Agent for and on behalf of the Issuer will be an amount equal to the sum of:
a) the amount which would be realised on the sale of certain debt obligations of Lehman selected by the Calculation Agent in a nominal amount equal to the then outstanding principal amount of the Notes, less costs and expenses associated with the said sale;
b) the Liquidation Proceeds of the Securities minus the then outstanding principal amount of the Notes which shall be
(i) expressed as a positive amount if the Liquidation Proceeds of the Securities are greater than the then outstanding principal amount of the Notes,
(ii) expressed as a negative amount if the Liquidation Proceeds of the Securities are less than the then outstanding principal amount of the Notes and (iii) zero if the Liquidation Proceeds of the Securities are equal to the then outstanding principal amount of the Notes; and
c) the amount of any early termination amount or close out payment receivable (expressed as a positive amount) or payable (expressed as a negative amount) by the Issuer under the Swap Agreement to the Swap Counterparty.

Q4. What is the likely Credit Event Redemption Amount?
The Credit Event Redemption Amount will be determined by the Calculation Agent in accordance with the procedures described in the Pricing Statement. Based on current market conditions, the Credit Event Redemption Amount is likely to be zero or an amount close to zero. It is likely that Noteholders will lose all or substantially all of their principal invested in the Notes. The Calculation Agent will notify you of the Credit Event Redemption Amount as soon as reasonably practicable after its determination.

Q5. What actions do Noteholders need to take and who should they contact if they have questions?
Noteholders who have any questions on this Notice or are unsure as to the action they should take should contact the Distributor through whom they have subscribed for the Notes.

Q6. How will I be notified of the status of the Notes?
Investors should receive notices in one of two ways:
(i) either through one of the distributors or
(ii) directly from the Issuer (Jubilee).

The Issuer has prepared a “Notice to Noteholders” stating that a Credit Event has occurred in respect of Lehman. This Notice was delivered by the Issuer to the various distributors on or about September 25, 2008. The Issuer is preparing to directly mail notices to investors once it receives relevant mailing information from CDP. The Issuer also expects to prepare and distribute a valuation notice informing the Noteholders of the Credit Event Redemption Amount once such amount is determined.

Q7. Can you provide more information on how the Credit Event Redemption Amount is calculated?
The Credit Event Redemption Amount is calculated in accordance with the formula described in the Pricing Statement. See also Q3 above. The Credit Event Redemption Amount is based (among other things) on the amount realized on the sale of certain debt obligations of Lehman. Because Lehman has filed for bankruptcy, these Lehman obligations are trading significantly below their face value. Generally speaking,
these Lehman obligations are currently valued below 20% of their face value. This amount will be further adjusted by
(i) any loss in the liquidation of the Securities (see also Q8 below), and
(ii) any termination amounts due or payable under the swap, to arrive at the Credit Event Redemption Amount. Based on current market conditions we expect the Credit Event Redemption Amount to be zero.

Q8. Can you explain what the Securities represent and whether there is a loss in value in respect of the Securities?
The Securities are notes whose performance is credit-linked to a pool of 120 Underlying Reference Entities.
The current U.S. financial crisis has led to unfavorable market conditions in the broad credit markets which has led to a significant decline in the value of the Securities. The liquidation proceeds of the Securities will likely be significantly less than the face value of the Securities.

AIS is in constant communication with Merrill to bring you the latest updates.


nhyone said...

The investors of Merill Lynch Jubilee 3 and DBS High Notes 5 can still sue the issuer for misleading them. :)

nhyone said...

SGS just require a minimum of S$1,000. Just that they weren't better promoted.

Recently the 3-month rate finally went up above 1%...

Anonymous said...

Mis-leading and misrepresentation by the company and the RMs or the salesmen will be the best recourse to recover your money, fully.
There was definitely mis-selling.

Anonymous said...

This action of a bond/note terminating just because of a credit event of just 1 RE is adding more risk to the mix. Why would anybody want to buy a bond with 6 or 7 REs when buying a bond with 1 RE would be safer? It’s unfortunate that this ruling that first-to-default will terminate the bond is now highlighted. Many investors may have mistakenly believed that having more REs is better, when it is the other way round.

Anonymous said...

This is a piece of shit news to me and those who are holding this note. It’s a scam and out to cheat retail investors. Why should the lost be offset from the sales proceeds of LB bonds instead of using the balance amount to return to the investors. There still some valure no matter how low it is and it should be return to the investors.

What kind of mathematics is this? It should be X +Y and not X - Z ! Y is the balance amt of the underlying securities and Z is the loss after selling the securities. Why should we bear their losses when we already lost some money when the securities are sold off ?
There was no mentioned of the other 6 bonds, they did not bankurpt and should be worth some money?

The way they calculate it is no difference to robbery ! This must be the biggest cheat i have come across in my life.

Anonymous said...

Yes, it’s a product that is very unfair for the investors. Let me try to illustrate it.

Noteholders put up $1million. The money is used to buy securities.

Issuer buys bonds of $1million of the 6 reference entities (or sells credit default swaps).

In return for the coupons, noteholders agree to give issuer the $1million of securities should there be any default. Issuer will give the defaulted $1 million bond to noteholders.

A defaulted bond might be worth only $300,000. The noteholder will get that and hand over $1million in securities.

The problem now is the writedown of the securities. If the securities are only worth $800,000, then you have to make up for the $200,000 drop. Thus, you only get back $100,000.

In the Jubilee 3 case, the drop in value of the underlying securities is much higher than the worth of the defaulted bond, thus there is nothing left to take back.

Unfortunately, all these scenario would have been explained in the prospectus.

Anonymous said...

The unfairness of it all. All this was never explained by the FIs through their RMs. The public must be educated never to touch any structured deposits. The products are evil and devised to the benefit of the FIs and the issuer only. They may be marketed that principal is protected at maturity, but examine the small print following. Laws must be made to protect the public. After all would anyone knowingly risk all just to have 3 to 5% interest pa.

GOHCT said...

In the ML Jubilee 3 case, the drop in value of the underlying securities is much higher than the worth of the defaulted bond, thus there is nothing left to take back.

Can I know how many people have bought the Merill Lynch Jubilee 3 Notes.

Mr. Tan, do you has any ideas. Thanks

Anonymous said...

Merill Lynch Jubilee Series 3

350 retail investor -$23M
Institution investor - $5M

Anonymous said...

This kind of investment is reminiscence of bucket trading in 1983/4. In those days, so called Companies set up by Hongkees to trade in commdodities, i.e Gold Bullion, Sota Bean, Pork belly, etc solicited naive retail investors to invest tens of thousands of dollars in commodities i,e, Gold etc. Within a matter or days after putting your money, you receive a letter informing you that your capital were all lost and that you have to top up more money if you want to recover back your loss.
When many complaints were lodged with the authority, these HongKee company closed overnight, leaving "investor" with hugh losses. Needless to say, these companies are set up by professional fraudsters out to cheat people of their money.

GOHCT said...

The investors of the High Notes have submitted a collective letter to DBS to seek an open forum with the senior management.

Jubilee Series 3 investors, what do you think.

Let me know. Thanks

GOHCT said...$file/UOBKH_announcement_on_MiniBonds.pdf?openelement

(Incorporated In The Republic Of Singapore)
Company Registration No. 200004464C
The Securities Association of Singapore (SAS) on 28 October 2008 announced
on behalf of 6 member firms including UOBKH that they have considered and will
take steps to address the plight of the Vulnerable Investors.
Vulnerable Investors are those who are 62 years of age and above, less educated
and have little investment experience.
Without admission to any liability whatsoever on the part of UOBKH and the 5
member firms and solely in the interest of assisting to alleviate the financial
hardship suffered by Vulnerable Investors arising from their investments in the
LBMB and the MLJS3 notes, UOBKH and the 5 member firms are prepared to
repurchase from this group at a value up to the cost of their respective
The sales and distribution of unit trust and structured products form a peripheral
part of the Group's business and are insignificant.
We have sold less than S$250,000 in value of LBMB and MLJS3 notes to
investors who are considered Vulnerable.
UOBKH have also established processes and committees to handle and to
resolve fairly complaints of mis-selling which may be directed at our trading
representatives with respect to the above notes.
Esmond Choo
28 October 2008

Anonymous said...


recently I sent an email to they requested that I sent them a copy letter of correspondent we had with the bank for verification.

However after I sent the letter, no one from Jubilee mailbox actually reply to my mail. I want to ask if this a valid mailbox? or is it a fraud ? i am abit worried. Can some one please clarified this for me. Thank you very much


Anonymous said...

Not in use anymore. CASE CLOSED. Forget it and carry on.

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