<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Nov 12, 2008
</TR><!-- headline one : start --><TR>HSBC acts on Minibonds <!--10 min-->
</TR><!-- headline one : end --><TR>It has taken steps to protect Lehman Minibond investors. </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Francis Chan
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The Monetary Authority of Singapore (MAS) announced that steps have been taken to help preserve the value of investors' ill-fated investments. -- PHOTO: REUTERS
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INVESTORS stuck with Minibonds linked to bankrupt Lehman Brothers got some disappointing news on Wednesday night but also some moderately good news.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
MAS PRESS RELEASE: ACTIONS TAKEN TO PROTECT INTERESTS OF NOTEHOLDERS OF THE LEHMAN MINIBOND NOTES PROGRAMME
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</TD></TR></TBODY></TABLE>First, there is still no swap counterparty to replace Lehman, though proposals are still being examined. This remains the main hope for investors to get their money back.
But on a positive note, the Monetary Authority of Singapore (MAS) announced steps to help preserve the value of their ill-fated investments.
The central bank advised, however, that investors will have to remain patient as other options to restructure the complex product are explored.
One key step taken is that HSBC Institutional Trust Services Singapore - the trustee for Minibonds - has decided to 'terminate the swap arrangements in the underlying securities' for some Minibond series.
This complex-sounding manoeuvre essentially removes one element of risk that could further whittle down the value of the Minibonds.
In simple terms, should efforts to restructure Minibonds fail, what investors get back depends on the value of the underlying securities that backed the Minibonds.
Most Minibonds series were backed by collateralised debt obligations (CDOs), which were in turn backed by certain assets like bonds.
The problem is that these CDOs also entered into swap agreements that could erode the value of their assets should credit conditions further deteriorate in the global economy.
Terminating these swap agreements stops the latter from happening.
There is still a possibility that investors may lose most or all their money. But the action taken means that investors are better off, because they are protected from any unnecessary erosion in the final valuation of the notes for investors.
Swap arrangements occurred for Minibonds Series 1 to 8, but not Series 9 and 10.
The Straits Times understands that the move to terminate the swap agreements was initiated by PricewaterhouseCoopers Singapore (PwC), who have been appointed as receivers for the Minibonds series that have defaulted.
PwC's job is to take control of the assets of Minibonds and work closely with the trustee to find the best solution for noteholders.
Meanwhile, the search for a new swap counterparty to replace Lehman continues.
Mr Goh Thien Pong of PwC told the Straits Times on Wednesday that 'draft proposals have been made by the interested parties'.
'The proposals are more complex than a straight substitution of the existing swap counterparty, with legal and financial restructuring implications that need to be closely examined,' he added.
To further protect the interests of Minibond holders, MAS said on Wednesday that it has appointed Deloitte and Touche Corporate Finance as an independent financial adviser.
Deloitte's job is to advise noteholders on the merits and risks of a proposal, if it is put to them for approval. MAS is paying for Deloitte's services.
MAS has told HSBC Trustee to work towards providing noteholders with an update on whether this type of restructuring is still a viable option by the end of the month. It said that investors need not take any action now.
Read the full story in Thursday's edition of The Straits Times.
Read also:
HK Lehman probe debated
</TR><!-- headline one : start --><TR>HSBC acts on Minibonds <!--10 min-->
</TR><!-- headline one : end --><TR>It has taken steps to protect Lehman Minibond investors. </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Francis Chan
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
The Monetary Authority of Singapore (MAS) announced that steps have been taken to help preserve the value of investors' ill-fated investments. -- PHOTO: REUTERS
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"-->
INVESTORS stuck with Minibonds linked to bankrupt Lehman Brothers got some disappointing news on Wednesday night but also some moderately good news.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
<!-- Photo Gallery -->
</TD></TR></TBODY></TABLE>First, there is still no swap counterparty to replace Lehman, though proposals are still being examined. This remains the main hope for investors to get their money back.
But on a positive note, the Monetary Authority of Singapore (MAS) announced steps to help preserve the value of their ill-fated investments.
The central bank advised, however, that investors will have to remain patient as other options to restructure the complex product are explored.
One key step taken is that HSBC Institutional Trust Services Singapore - the trustee for Minibonds - has decided to 'terminate the swap arrangements in the underlying securities' for some Minibond series.
This complex-sounding manoeuvre essentially removes one element of risk that could further whittle down the value of the Minibonds.
In simple terms, should efforts to restructure Minibonds fail, what investors get back depends on the value of the underlying securities that backed the Minibonds.
Most Minibonds series were backed by collateralised debt obligations (CDOs), which were in turn backed by certain assets like bonds.
The problem is that these CDOs also entered into swap agreements that could erode the value of their assets should credit conditions further deteriorate in the global economy.
Terminating these swap agreements stops the latter from happening.
There is still a possibility that investors may lose most or all their money. But the action taken means that investors are better off, because they are protected from any unnecessary erosion in the final valuation of the notes for investors.
Swap arrangements occurred for Minibonds Series 1 to 8, but not Series 9 and 10.
The Straits Times understands that the move to terminate the swap agreements was initiated by PricewaterhouseCoopers Singapore (PwC), who have been appointed as receivers for the Minibonds series that have defaulted.
PwC's job is to take control of the assets of Minibonds and work closely with the trustee to find the best solution for noteholders.
Meanwhile, the search for a new swap counterparty to replace Lehman continues.
Mr Goh Thien Pong of PwC told the Straits Times on Wednesday that 'draft proposals have been made by the interested parties'.
'The proposals are more complex than a straight substitution of the existing swap counterparty, with legal and financial restructuring implications that need to be closely examined,' he added.
To further protect the interests of Minibond holders, MAS said on Wednesday that it has appointed Deloitte and Touche Corporate Finance as an independent financial adviser.
Deloitte's job is to advise noteholders on the merits and risks of a proposal, if it is put to them for approval. MAS is paying for Deloitte's services.
MAS has told HSBC Trustee to work towards providing noteholders with an update on whether this type of restructuring is still a viable option by the end of the month. It said that investors need not take any action now.
Read the full story in Thursday's edition of The Straits Times.
Read also:
HK Lehman probe debated
