Tan Kin Lian's Blog: MAS publishes timeline for Minibond resolution process

Saturday, October 11, 2008

MAS publishes timeline for Minibond resolution process

10 October 2008

MAS publishes timeline for Minibond resolution process
The Monetary Authority of Singapore (MAS) has published a timeline for the resolution process for investors who bought Lehman Minibonds. The trustee (HSBC Institutional Trust Services Singapore), which is in charge of overseeing the Minibond products, has informed the MAS that it has not received any firm offers from potential new swap counterparties to replace the now bankrupt Lehman Brothers in the Minibond progamme. The MAS has said that the trustee does not expect any firm offers and will commence the selling of the underlying securities in two weeks.

If in the event of a swap counterparty being found the replacement swap proposal would require at least 75% of the votes cast by the noteholders at an extraordinary general meeting. However if a firm agreement is not reached within two weeks the trustee will commence the enforcement process for Series 5 and 6 of the Minibonds, which will ultimately entail selling the underlying securities in an orderly fashion and using the proceeds to pay the noteholders after deducting any other liabilities which are payable.

The total issue size of the Minibond programme was SG$508 million, of which S$375 million was sold to about 8,000 retail investors through nine distributors. Meanwhile SG$23 million of the total SG$28 million of Merrill Lynch Jubilee Series 3, which referenced Lehman Brothers, were sold to about 350 investors through six stockbroking firms. Over 80% of the Minibond programme and Merrill Lynch Jubilee Series 3 noteholders invested up to SG$50,000, with 28% having bought SG$10,000 or less. In the case of DBS High Notes 5, which also referenced Lehman Brothers, over 1,400 investors bought SG$103 million worth of notes. More than half of them invested SG$50,000 or less.

As of 10 October 2008, the ten distributors of the Minibond programme, Merrill Lynch Jubilee Series 3, and the DBS High Notes 5 have received 680 formal complaints from investors.

http://www.structuredproductsonline.com/public/showPage.html?page=819778

9 comments:

Tan Kin Lian said...: I am in contact with a party (based in Hong Kong) who is interested to take over the management of the Minibonds, subject to due diligence.

This party has just received the documents from HSBC Trustees. They will be studying these documents (i.e. due dilegence) before they make their final decision.

Keep optimistic. Do not give up hope.; October 11, 2008 6:43 AM
Anonymous said...: Mr Tan,

Thank you for the update. Your blog is more informative and meaningful update than any of the irresponsible FI.

Keep us informed of any news from your HK contact. Thanks again; October 11, 2008 9:15 AM
Anonymous said...: Thank Mr Tan for all your help.

would like to know in an event that a party is willing to take over as a swap party, do that imply that we have to sign back the same contract which in the first place we have be 'cheated'??; October 11, 2008 9:19 AM
Anonymous said...: Won't the new swap counterparties be profit driven ? They can't be doing this for charity.

So won't they be taking another cut ?

Will investors just end up getting hurt twice ?; October 11, 2008 9:23 AM
Tan Kin Lian said...: Reply to 9:23 AM

If another party takes over the obligation of Lehman Brothers, they will wind down the swap arrangements. They will manage the underlying assets until the maturity dates, so that these assets can realise a better value, rather than the "fire sale value" today.

Most investors will likely get a better value, compared to the liquidation of the structure that will happen in two weeks' time.

I hope that this new party can come out with a proposal to be given to HSBC Trustees. According to MAS statement, 75% of the investors of the structure have to approve the new arrangement.

I hope that the investors will take a more positive approach, rather than a suspicious approach. Otherwise, nobody will come forward, except the crooks.

If the new arrangement is not favourable, the investors can still vote it down, and let the structure be liquidaed by the trustee.; October 11, 2008 9:34 AM
Anonymous said...: Mr Tan,
Thank you for your efforts.

Investors should realise that if they want their full principal back, they would have to prove to the FI that they were misled into buying the product. Then that contract will unwind and the parties will be put back in their original positions as if the transaction did not take place.

If such proof is not possible, then it is better not to liquidate the securities during this period of financial turmoil as it is likely that we will only get a small proportion back.

appreciative investor; October 11, 2008 9:57 AM
gushen said...: Mr Tan,
Its not about being suspicious... It about learning our lessons from this debacle and not blindly accept things as it is.

Its always good to question.

And it is a fair question. The new swap counterparty can't be in it for charity. Won't they benefit from it in some ways ? If so, it'll be better for it to be put out in the open.
And if its not too much, its perfectly alright for them to make something for their work.

Of course a BIG assumption here is that holding to maturity will return more to the investor. (i.e the market will recover upon maturity ). Also hopefully the new swap counterparty will not go bust too and we do not suffer another credit event.
Not trying to be overly pessimistic, just wearing the black hat here :); October 11, 2008 10:35 AM
Anonymous said...: Mr. Tan,

My opinion is the investors will sign as it is a no choice scenario. This is the recovery process that should not have happen in the first place had the FIs sold it responsibly by properly advise on the mechanism & risk involved or decide whether it fits the retail market in the first place.

We must continue to pursue this responsibilities for the sake of future products sales and to provide a route for people who do not want to participate this product anymore. What happen if one of the REs or issuer failed? Then FIs can claim that investors knew the risk of product so don't blame the them anymore.

Regards,; October 11, 2008 12:39 PM
Anonymous said...: Mr Tan
Thanks for orgnising today's event which allows space for us to get to know the rest of the investors and hopefully unity is strength.
Heard you've mentioned at the speaker's corner that HN5 notes is confirmed "gone" case and see wether the bank is willing to make some compensation? I've put the same question to one of the RM who called me after the event with regards to whether the FI will out of goodwill make some compensation to us? He replied that that it should not be termed "compensation" cos' they made no mistake and the amount is too huge for the FI to forge out too! Getting money back is like waiting for a "MIRACLE"! So are we HN5 investors no other choice but to end up in legal suit? This will be lengthly and more $ needs to be throw in!; October 12, 2008 12:25 AM