GIC's 70% paper loss on UBS

[makapaaa]

Feb 12, 2010

GIC's paper loss on UBS

It will convert $14.5b of notes to shares at price that would show loss

<!-- by line -->By Gabriel Chen
<!-- end by line -->
<!-- end left side bar --><!-- story content : start -->
THE Government of Singapore Investment Corp (GIC) will convert its 11 billion Swiss francs (S$14.5 billion) worth of UBS notes at a price that may show a 70 per cent paper loss in its investment in the Swiss bank.
GIC will exchange the mandatory convertible notes that it bought two years ago for 230.7 million ordinary shares in UBS on March 5, according to a regulatory filing with the United States Securities and Exchange Commission.
This would mean the conversion price would be at 47.7 Swiss francs a share.
At Wednesday's closing price of 13.67 Swiss francs for UBS shares, these shares would be worth just 3.15 billion Swiss francs, or around 7.85 billion Swiss francs less than its original investment of 11 billion Swiss francs.
GIC declined to comment yesterday.
Under the original agreement, the minimum conversion price was 51.48 Swiss francs and the maximum 60.23 Swiss francs, but GIC had said there was a reset due to certain anti-dilution clauses.
Read the full story in Friday's edition of The Straits Times.
[email protected]

<TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR class=msghead><TD><TABLE border=0 cellSpacing=0 cellPadding=0><TBODY><TR class=msghead vAlign=top><TD class=msgF width="1%" noWrap align=right>From: </TD><TD class=msgFname width="68%" noWrap>Cheepbuy <NOBR></NOBR> </TD><TD class=msgDate width="30%" noWrap align=right>Feb-11 6:51 pm </TD></TR><TR class=msghead><TD class=msgT height=20 width="1%" noWrap align=right>To: </TD><TD class=msgTname width="68%" noWrap>AcidSand <NOBR></NOBR></TD><TD class=msgNum noWrap align=right> (3 of 18) </TD></TR></TBODY></TABLE></TD></TR><TR><TD class=msgleft rowSpan=4 width="1%"> </TD><TD class=wintiny noWrap align=right>28478.3 in reply to 28478.2 </TD></TR><TR><TD height=8></TD></TR><TR><TD class=msgtxt>i wonder if the actual decision maker will be held responsible for this "screw up"...it is not just peanuts...it is a lot of peanut trees being burn away...
oh well, we will never know...the usual "strategic" reason the public should not know...blah blah blah from the actual sheep or sheeps in charge...
Lucky we are the real people with real lives rather then the sheeps who are screwing up on behalf of their lion...
<DT class=quote>The perfect bureaucrat everywhere is the man who manages to make no decisions and escape all responsibility. Brooks Atkinson (1894 - 1984),
</DT></TD></TR></TBODY></TABLE>

 

[makapaaa]

<TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR class=msghead><TD><TABLE border=0 cellSpacing=0 cellPadding=0><TBODY><TR class=msghead vAlign=top><TD class=msgF width="1%" noWrap align=right>From: </TD><TD class=msgFname width="68%" noWrap>Lola (Langusta) <NOBR></NOBR> </TD><TD class=msgDate width="30%" noWrap align=right>Feb-11 8:53 pm </TD></TR><TR class=msghead><TD class=msgT height=20 width="1%" noWrap align=right>To: </TD><TD class=msgTname width="68%" noWrap>fixncc <NOBR></NOBR></TD><TD class=msgNum noWrap align=right> (6 of 18) </TD></TR></TBODY></TABLE></TD></TR><TR><TD class=msgleft rowSpan=4 width="1%"> </TD><TD class=wintiny noWrap align=right>28478.6 in reply to 28478.1 </TD></TR><TR><TD height=8></TD></TR><TR><TD class=msgtxt>
<CENTER>

SO WHAT? ITS NOT MY MONEY! HEE HEE!!</CENTER></TD></TR><TR><TD> </TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR><TD class=msgleft width="1%"> </TD><TD class=msgopt width="24%" noWrap> Options</TD><TD class=msgrde width="50%" noWrap align=middle> Reply</TD><TD class=wintiny width="25%" noWrap align=right> </TD></TR><TR><TD class=msgbfrbot> </TD><TD colSpan=3>
<TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR class=msghead><TD><TABLE border=0 cellSpacing=0 cellPadding=0><TBODY><TR class=msghead vAlign=top><TD class=msgF width="1%" noWrap align=right>From: </TD><TD class=msgFname width="68%" noWrap>kojakbt89 <NOBR></NOBR> </TD><TD class=msgDate width="30%" noWrap align=right>Feb-11 11:42 pm </TD></TR><TR class=msghead><TD class=msgT height=20 width="1%" noWrap align=right>To: </TD><TD class=msgTname width="68%" noWrap>ALL <NOBR></NOBR></TD><TD class=msgNum noWrap align=right> (11 of 18) </TD></TR></TBODY></TABLE></TD></TR><TR><TD class=msgleft rowSpan=4 width="1%"> </TD><TD class=wintiny noWrap align=right>28478.11 in reply to 28478.10 </TD></TR><TR><TD height=8></TD></TR><TR><TD class=msgtxt>Feb 12, 2010

GIC may have 70% paper loss on UBS

It will convert $14.5b of notes to shares at price that would show loss

<!-- by line -->By Gabriel Chen
http://www.straitstimes.com/PrimeNews/Story/STIStory_489548.html
<!-- end by line -->
<!-- end left side bar --><!-- story content : start -->
THE Government of Singapore Investment Corp (GIC) will convert its 11 billion Swiss francs (S$14.5 billion) worth of UBS notes at a price that may show a 70 per cent paper loss in its investment in the Swiss bank.
GIC will exchange the mandatory convertible notes that it bought two years ago for 230.7 million ordinary shares in UBS on March 5, according to a regulatory filing with the United States Securities and Exchange Commission.
This would mean the conversion price would be at 47.7 Swiss francs a share.
At Wednesday's closing price of 13.67 Swiss francs for UBS shares, these shares would be worth just 3.15 billion Swiss francs, or around 7.85 billion Swiss francs less than its original investment of 11 billion Swiss francs.
GIC declined to comment yesterday.
Under the original agreement, the minimum conversion price was 51.48 Swiss francs and the maximum 60.23 Swiss francs, but GIC had said there was a reset due to certain anti-dilution clauses.
Under the terms of the deal, the notes will 'automatically' convert into ordinary shares at maturity on March 5.
The paper losses were not entirely unexpected.
GIC chief investment officer Ng Kok Song said in September that its UBS investment is still showing a loss.
The exact value of these notes, which would have fluctuated and taken a hit during the financial crisis, have been difficult to determine as they are not easily tradable.
Holding UBS stock means that GIC can monitor the value of its investment more easily as the stock is traded on the open market.
GIC will also earn 2 billion Swiss francs on its UBS investment through a 9 per cent fixed coupon, which could partially mitigate the paper losses.
The investment firm is entitled to this annual payout as part of the two-year term of the UBS notes it held.
The filing showed that GIC would have a stake of 6.6 per cent in UBS, assuming the notes are converted into shares.
The Straits Times understands that GIC will be the largest shareholder in UBS following the conversion.
UBS has fallen on hard times stemming from its big losses in the credit crisis and its embroilment in a dispute over bank secrecy with the US.
While the bank earned 1.21 billion francs in the fourth quarter - its first profit since the third quarter of 2008 - it also said that withdrawals by wealthy clients accelerated in the fourth quarter.
The bank suffered net outflows of 90 billion Swiss francs last year - bigger than many private banks.
The news of the hit on the UBS stake comes just a month after GIC said that it had recognised losses on its US$675 million (S$953 million) investment in Stuyvesant Town and Peter Cooper Village complexes in Manhattan in New York.
While GIC has not confirmed the total value of its investments, it is believed to have written down the value of about US$575 million in mezzanine debt.
GIC recently profited from a well-timed sale of part of its Citigroup holding.
It sold about half its Citi stake in September, reaping a profit of US$1.6 billion and leaving it with a 4.9 per cent slice of the US bank.
GIC's portfolio, according to its annual report released later that month, sank by more than a fifth in the wake of the financial crisis.
Its recent investments have ranged from the hotel industry and China property developer Longfor to a video-gaming firm.

</TD></TR><TR><TD> </TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR><TD class=msgleft width="1%"> </TD><TD class=msgopt width="24%" noWrap> Options</TD><TD class=msgrde width="50%" noWrap align=middle> Reply</TD><TD class=wintiny width="25%" noWrap align=right> </TD></TR><TR><TD class=msgbfrbot> </TD><TD colSpan=3> </TD></TR></TBODY></TABLE>
</TD></TR></TBODY></TABLE>

 

[makapaaa]

http://www.asiaone.com/Business/News/My+Money/Story/A1Story20080131-47536.html

<TABLE class=bodytext border=0 cellSpacing=0 cellPadding=0 width=560><TBODY><TR><TD class=bodytext height=7>>> ASIAONE / BUSINESS / NEWS / MY MONEY / STORY </TD></TR></TBODY></TABLE><!-- start story details --><TABLE border=0 cellSpacing=0 cellPadding=0 width=560><TBODY><TR><TD height=7 colSpan=3>

</TD></TR><!--tr> <td colspan="3"> </td> </tr--><!-- ~RENDER PAGE MARKER~ --><!-- Story With Image Start --><TR><TD vAlign=top width=350>

</TD><TD width=5>

</TD><TD vAlign=top width=200 align=left><TABLE><TBODY><TR><TD height=81>

</TD></TR><TR><TD class=content_subtitle align=left>Thu, Jan 31, 2008
my paper
</TD></TR><TR><TD height=15>

</TD></TR><TR><TD align=left><TABLE border=0 cellSpacing=0 cellPadding=0><TBODY><TR><TD vAlign=top align=left> </TD><TD height=15>

</TD><TD vAlign=top align=right><FORM method=post name=emailToFriendForm action=emailToFriend.jsp><INPUT value=/vgn-ext-templating/asiaone/emailToFriend.jsp?vgnextoid=e60101d377dc7110VgnVCM100000bd0a0a0aRCRD&vgnextchannel=638967c086322110VgnVCM100000bd0a0a0aRCRD type=hidden name=emailToFriendPageURL> <INPUT value=http://www.asiaone.com/Business/News/My%2BMoney/Story/A1Story20080131-47536.html type=hidden name=emailToFriendStoryLink> </FORM><SCRIPT> function openEmailWindow(emailToFriendForm) { var emailToFriendPageURL = emailToFriendForm.emailToFriendPageURL.value; emailToFriendForm.action = emailToFriendPageURL; emailToFriendForm.target="_blank"; emailToFriendForm.submit(); } </SCRIPT></TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE></TD></TR><TR><TD colSpan=3><!-- TITLE : start -->GIC can still invest in another troubled bank, says Tony Tan <!-- TITLE : end--></TD><TR><TD height=15 colSpan=3>

</TD></TR><!-- Story With Image End --><TR><TD class=bodytext colSpan=3><!-- CONTENT : start -->EVEN after taking significant stakes in UBS and Citigroup, the Government of Singapore Investment Corporation
(GIC) could still invest in another distressed bank, if the deal is worthwhile, the agency's deputy chairman Tony Tan revealed in a briefing to The Business Times.
<TABLE border=0 cellSpacing=2 cellPadding=2 width=122 align=right><TBODY><TR><TD>

</TD></TR><TR><TD class=bodytext>DR TONY TAN: Terms on the UBS, Citi deals were fair.</TD></TR></TBODY></TABLE>"We will look at any deal that is shown to us. We have a duty to do so.We would still have the capacity if we find it worthwhile to invest," he said.
"Whether it would be of the same size as what we are now doing is a matter to be decided."
<SCRIPT language=JavaScript src="/static/ads/scripts/adsimu.js"></SCRIPT><SCRIPT type=text/javascript src="http://ad.doubleclick.net/adj/AsiaOneNews/;pos=1;adtype=1;adtype=2;adtype=3;adtype=4;adtype=5;tile=5;sz=300x250;ord=2514880154623332.5?"></SCRIPT>On Dec 10 last year, GIC took a 9 per cent stake in UBS for 11 billion Swiss francs (S$14.2 billion), followed by an investment of US$6.88 (S$9.76 billion) in Citigroup on Jan 15.
Explaining the rationale for the two investments shortly after the closure of the Citigroup deal, Dr Tan acknowledged that both "are out of character for GIC", which, he said, prefers to be more of a portfolio investor.
However, what prompted GIC to invest in UBS and Citigroup was "a very unusual situation in US and European financial stocks, where a combination of events... have all come together to create a situation where even sound banks like UBS and Citigroup are temporarily facing significant problems. But their franchises are strong".
He added: "In the case of UBS, they have a worldwide global wealth management business which is something not replicable by any bank. Citigroup has an international worldwide consumer business which is also
unique."
Dr Tan indicated that the terms on which the two deals were negotiated were fair.
"We do not think that they are unduly favourable to GIC," he said, adding that "GIC is not seeking to take advantage of anyone".
He also disclosed that it was Citigroup that approached GIC.
Stressing the safety of the investments, Dr Tan pointed out that "notwithstanding their large size, the two transactions have been structured with appropriate downside protection and are within GIC's risk management
parameters".
Dr Tan pointed out that GIC's investments into UBS and Citigroup would not take the agency beyond its stipulated limits for investments in financial stocks.
"GIC's practice is to try and ensure that our risk is generally well spread out," he said. "(Our investments in) UBS and Citigroup, plus our present investments in financial companies in the US and Europe, are kept within the risk limits which we have prescribed."
Addressing the concerns expressed in some quarters about recent high-profile investments by sovereign wealth funds, Dr Tan maintained that such funds contribute to financial stability.
"If you look at the recent investments by sovereign wealth funds in the banks, they show that one benefit of sovereign wealth funds is that they are long-term investors who can provide capital when it's needed," he said.
"They are not short-term in-and-out dealers like hedge funds, and they can help stabilise financial positions."

</TD></TR></TBODY></TABLE>