Dear Mr Tan,
I received the letter from HSBC on the recovery value of my Minibond Series 5. I am shocked by the huge fee paid to Lehmen LBSF for the settlement fee. The letter has these figures:
Series 5
Proceeds from liquidation – 82.30% (100% = principal amount)
Cost at underlying level – 0.47%
Swap payment to LBSF – 50.81%
Receivers fees – 0.38%
Legal fees – 0.48%
Other costs – 0.31%
Net proceeds to noteholders – 29.85%
A whopping 50.81% or $35 million is paid to LBSF.
Another friend, who has Series 10 has a liquidation value pf 104% but reduced by 41% fee to LBSF:
Series 10
Proceeds from liquidation – 104.04% (100% = principal amount)
Swap payment to LBSF – 40.60%
Receivers fees – 0.42%
Legal fees – 0.26%
Other costs – 0.33%
Net proceeds to noteholders – 62.43%
It is not true as reported in papers that some series has low recovery value due to nature of underlying assets or long maturity. The fact is huge fee has been paid to LBSF. Is this why Australia’s Lehman notes have been able to recover 85-95% instead (recently reported in your blog)? I feel HSBC and Receivers have failed the noteholders - a total of $200+ million has probably been paid to LBSF for this unfair settlement.
Mr Tan, do you think the large settlement fees to LBSF is fair? Thank you.
REPLY
I cannot understand why a large payment has to be given to the swap counterparty. I suggest that, as an investor, you ask the trustee on why the payment to the swap counterparty is so large. Maybe, you can get a few investors to join you in making a joint request.
FURTHER COMMENT
The swap is to take over the risk of default of the reference entities during the remainder of the contract. I believe that most of the reference entities are now quite secure, after the recovery of the global economy and markets. I am therefore surprised to find a large payment to take off the swap.
I think that the investors should ask the trustees to account fOR their decision to make this large payment, and ensure that it is in the commercial interest of the investors to accept this transaction.
I thought that the Monetary Authority of Singapore is monitoring this transaction, so they may have some information that may be helpful. We have to see if they make any statement on this matter.
I wish that we have a more active Parliament, similar to Hong Kong, where the legislators can ask questions, so that a clear explanation can be given to the public.
In such notes, investors are selling credit protection to a counterparty via credit default swaps. Since the credit event has happened, the large payment you see here is merely the "insurance payout" the investors make to honor their obligations under the swaps. Nothing unusal.
ReplyDeletethe party that sell us the poison and fail us get a larger payout than us, cant understand the logic.
ReplyDeleteThe swap is to take over the risk of default of the reference entities during the remainder of the contract. I believe that most of the reference entities are now quite secure, after the recovery of the global economy and markets. I am therefore surprised to find a large payment to take off the swap.
ReplyDeleteI think that the investors should ask the trustees to account fro their decision to make this large payment, and ensure that it is in the commercial interest of the investors to accept this transaction.
I thought that the Monetary Authority of Singapore is monitoring this transaction, so they may have some information that may be helpful. We have to see if they make any statement on this matter.
I wish that we have a more active Parliament, similar to Hong Kong, where the legislators can ask questions, so that a clear explanation can be given to the public.
Mine is minibond series 2. I have yet to receive any letter regarding the residual payout. Anybody in the same boat as me?
ReplyDeleteThanks.
Again I ask:
ReplyDeleteWhere is the Straits Times?
Where is Channel News Asia?
Where are the Members of Parliament (Opposition, Nominated and PAP)?
I am just disgusted and full of anger on how investors here are taken for a ride and MAS has done NOTHING to help as compare to what the authorities have done in Hong Kong.It is ridiculous that swap payment is as high as 50%. No difference to loan shark.. in fact it is even worst !
ReplyDeleteMine is series 9. The liquidated value is 104% but similarly a large sum of 45% is paid out to Lehman, leaving a final value of 57%. While I feel relieved that there is a recovery value, I cannot accept that such a large payment was made to Lehman. I agree with the writer that this is unfair and the trustee/receivers had not acted in our interest.
ReplyDeleteI agree with Mr Tan that our parliament had failed to speak for the citizens.
3:58am,
ReplyDeleteWhat "insurance payout"? Lehman is not a RE or underlying asset in the notes - none defaulted. It is just the swap counterparty cannot proceed with Lehman bankrupcy - does this deserve such a large payout back to Lehman again?
For Pinnacle Note holders, do you still believe you can get back 100% when your series can last until mature?
ReplyDeleteThere are so many facts the Big FI want to hide.
For those try to attacked Mr Tan, do you understand Mr Tan is the only person want to lead us fight big shark FI? Do you want Shark eat up all small fish then die for hungry? The nature world have to find its balance system, so do the human world. The God send Mr Tan to help us, please stop your attacks to Mr Tan.
That is why when my son asked me whether banking career is good in Singapore, I said 100% yes.
ReplyDeleteAs for minibond, the letter mentioned the undelying securities for Series 5 is GE. I dont see GE failing anytime soon.
It is also shocking that the trustee when accepting appointment did not have custody of the underlying securitis and ended up paying the issuer such a large sum to release the securities. What is the role of the trustee when it can not protect the note holders? How can the issuer who has gone bankrupt and unable to service the interest or premium can end up taking a big chunk of the realised value. If the trustee did not terminate the swap arrangement, we dont get pay either so what kind of logic or arrangement the trustee has with the issuer when they take up the appointment?
Unfortunately, if the regulator does not ask these questions, we small investors just have to swallow our losses.
MPs are not suppose to talk about any issues openly unless given the green light by the top. Wonder why our MPs are so quiet about this issue since Sept 2008? The invisible in action again.
ReplyDeleteMB3A paid LBSF 29.75%. Maybe for those with 0 high compensation i.e. 0 people compensated <50% are product bought by Town Council thus the residue value is high.
If only MAS/Trustees are transparent about the huge different in paying LBSF, such confusion will not happen....
For Minibond Series 9 & 10, there is no underlying CDS with the swap counter-party LBSF. The underlying securities are the bonds of Bank Wachovia, taken over by Wells Fargo, one of the strongest bank in USA today. So, why the necessity to pay 40.6% SWAP fees to LBSF. Might as well let Series 9 & 10 runs to maturities and investors earn the interest on the bonds (about 3.5% p.a), plus some capital gains on maturity.
ReplyDeleteEven a cynical & sinful old barstard like me is outraged. I've not lost any money, but I'm outraged at this latest attempt to extract more money from these unfortunate Singaporeans.
ReplyDeleteI cannot believe the silence from our Members of Parliament (whether PAP, Opposition or Nominated).
We talk a lot about "Meritocracy". Here are 2 new words for you ... Oligarchy and Plutocracy
An oligarchy is a form of government in which power effectively rests with a small elite segment of society distinguished by royalty, wealth, intellect, family ties, military might, or religion hegemony
Source:
http://en.wikipedia.org/wiki/Oligarchy
Plutocracy is rule by the wealthy, or power provided by wealth. The combination of both plutocracy and oligarchy is called plutarchy.
In a plutocracy, the degree of economic inequality is high while the level of social mobility is low. This can apply to a multitude of government systems, as the key elements of plutocracy transcend and often occur concurrently with the features of those systems.
Source:
http://en.wikipedia.org/wiki/Plutocracy
Can a class action be taken against HSBC Trustee and Receivers?
ReplyDeleteCan the class action by US lawyers taken against LBSF to recover the huge fees paid?
The swap payout is most likely for the unwinding of the synthetic CDOs. ie the 100+ underlying entities that had CDS underwritten under the notes.
ReplyDeleteThis is where the biggest impairment is expected to take place and has nothing to do with the 6 reference entities.
Although the receivers and the trustees have explained the rationale for those swap fees to the swap counter-party - LBSF, the question here is did the investors agree to those swap fees, especially for Series 9 & 10, where there is no underlying CDS with the swap counterparty - LBSF, bearing in mind that Wells Fargo is now one of the strongest and biggest banks in USA and chances of default for bonds of Bank Wachovia is practicaly nil.
ReplyDeleteThe problem is not GE defaulting or the first layer CDO defaulting ie. 6 reference entities. The poison is the 2nd level CDS i.e. the 12/150 for MB3A, with bogus rating defaulting. If it happens, MB3A will become Pinnacle or HN5 i.e. you get nothing back or $185 dollars.
ReplyDeleteSo is it a blessing? It all depends how you look at it. I guess HSBC trustees, PWC receivers and LBSF worked closely on the black and white, bulletproof Prospectus created by LB.
So what's next for me?
Get the residue value & go to listen to TKL seminar and also consider joining MIAG to sue LB and Minibond.
MAS, HSBC trustees and PWC are acting like PAP i.e. no more reply and close book. This is how things work here and how people you voted in behave when there is trouble they cannot solve. Worst is all the MPs are equally muted and not helping. All very good to ask for more allowance and permitting the ministers to increase salary without any strong objections.
After the election, what happen? Well, PAP will win with a smaller margin and then ask for pay raise due to "long-time-no raise and economy is flying". MPs just smile and approve in parliment because their allowance will also goes up.
What happen to heartlanders? Work Faster, pretend to be Better and earn cheaper than Foreign Talent so that productivity will increase, GDP will increase, MP allowance can increase and Ministers pay finally increase to set another world record as the world's most highly paid government based on the reason that the winning margin of the coming election is people approval and support of Minister pay increase.
Sign. We are suckers again.....
I have series 9 and 10 - both have liquidation values that is more than 100%, but now the recovery is less than 60% because of the huge fees to LBSF. Series 9 and 10 are not CDO but Wachovia bonds, why did the trustee agree to such hugh losses to investors of series 9 and 10?
ReplyDeleteI did not agree to this unfair settlement - can I file to FIDerec against HSBC Trustee?
Yes, the fighting is not over, with some money back, we should continue our fighting for the justice.
ReplyDeleteI have series 1:
ReplyDeleteProceeds from liguidation 54%
Payment to LBSF 28%
Investor gets 24%
I think the Proceeds from liquidation already factor in the undertaking of risk and unwinding of CDO.
Hence I really question why such a large payment to LBSF.
I wish someone who can write well send letters to The Straits Times and see what will be the response from the relevant authorities. Investors are being sucked high and dry.
ReplyDeleteYou no need to write well. Just us MAS website and they usually will answer you in a few days. Sometime it can take a few weeks but they usually will answer back.
ReplyDeleteThere are so many questions but no one seems to bother or too afraid to meet us to answer them.
i) Why series 1 & 5 compensation for <50% is >60% while series 2 and 3 had 0 people compensated with less than 50%. For series 2&3, if the investor file their complain to FIDREC, they will get back at least 50% compensaiton.
ii) Why trustees pay LB so much money.
iii) what are the amount of money and product series Town Council invested in?
iv) Why is there a need to terminate series 9 and 10 when they are not even CDO or CDS.
With the recovered value, we should band together for court action against HSBC and PWC who failed in their duties, and LBSF who now has our money. Can MIAG refocus the class action against these instead? I believe more investors will join the class action. I will.
ReplyDeleteI fumed on getting my letters. HSBC owe us an explanation for this unfair settlement!
ReplyDeleteMAS - it is time you act!!!
I disagree with the large payout to LBSF and demand an explanation from HSBC and MAS.
ReplyDeleteI have submitted my particulars to Mr Tan. Please do so if you have not - we need to build a force against these bullies
After reading all the comments, I also wonder why the big difference pay to LBSF? Mine is series 2, nothing defaluted from what I know. And is backed by General Electric corporate bonds and GE is still standing strong investing billions in China. So I wonder why I had to pay LBSF 21% ? This swap thing is too complicated for me to understand, although I'm glad to get back some money after a long period of insomnia. At least it's better than Jubilee and Pinnacle where I lost everything. Everything !!!. And both Meryll Lych and Morgan Stanley are still around; one bought by BoA and another becomes a commerical bank. Fxxx those ang mo bastards bllod suckers.. Who else can help us????
ReplyDelete"I wish someone who can write well send letters to The Straits Times and see what will be the response from the relevant authorities."
ReplyDeleteIf Singapore had some real reporters, they would have gone out to do some investigative journalism by themselves.
If the "relevant authorities" (are they relevant anymore?) really cared, they would have contacted you. Is it really so difficult to locate somebody in Singapore?
Your house was robbed. The sheriff came and carried out a unilateral settlement with the robber. The robber received the sofa and your 50-inch LCD TV. You get back your coffee table. You protested but the sheriff went ahead to close the case. The city government gave out a special award to the sheriff for closing the case so swiftly as it helped to promote their productivity drive. The newspapers screamed niceties about the sheriff and government's quick actions.
ReplyDeleteYou are left with your coffee table and wondered what was wrong. "At least you still have your coffee table, you should be happy", they said, "the robber only got the sofa and TV" :(
Lets us all send email to MAS. This is the fastest way to reach them. We have to make MAS busy on this issue. Imagine receiving few hundreds e-mail in a single day. Ask the same questions posted on this forum. I will do this tomorrow. Lets us not simply accept the percentage given. This is as good as daylight robbery !
ReplyDeleteHi Anon Feb 11, 2010 5:49 PM,
ReplyDeleteMine is also series 2. I have just received a letter showing the breakdown on the various costs and fees involved and finally the recovery value of 62.36%.
I fumed over the daylight robbery fees/costs involved in the unwinding processes. But the most important is when we can receive the payment.
Fellow minibond unitholders:
ReplyDeleteI urge you to submit your particulars to Mr Tan blog at entry:
Fee To Swap Counter Party On Minibond
We need an explanation from HSBC Trustee
payment completed today. Mine is MB3A.
ReplyDeleteContented i.e. better than $0 while still sored about my lost. Also sored about the huge fee paid to LB.
A very good lesson learned about investment & not trusting FA/RM, how different is our political system and Hong Kong's, how the Govt ignored us and finally, I lost my confident and support for the current Govt especially those MPs who do NOTHING at all.
Those MPs are only answerable to their own party and not the people who voted for them.