Monday, October 06, 2008

Hong kong - minibond buyback proposal

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.


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.

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

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.

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?

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?

hkeric said...

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












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;; 65 6415 8153

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.

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