<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published October 2, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Minibond saga nears closure with settlement
Investors likely to recover a part of their original investment
By CONRAD TAN
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
</TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Print article </TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>
(SINGAPORE) Singapore investors who bought Lehman Minibonds can expect to recover part of their original investment in the next few months, after the receivers in charge of unwinding the structured notes reached a settlement this week that gives them full control of the underlying assets.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>The agreement ends a standoff that has lasted several months, and which threatened to turn into a lengthy and messy international legal battle among the different parties laying claim to the US corporate bonds that formed the collateral for the Minibond notes.
Eight law firms across four different legal jurisdictions - Singapore, the United States, the United Kingdom and the Cayman Islands - were involved in the settlement, which took effect on Sept 28.
But it is still unknown how much money the noteholders will get back, and the amount is likely to vary considerably across different series of the Minibond notes, the receivers warned yesterday.
The exact sum recovered will be determined after the receivers sell the collateral - which they say may take several months, to secure a reasonable price.
The receivers said they had chosen an international investment bank to manage the sale of the assets, but declined to name the bank.
'This settlement provides certainty to the noteholders that at least some of their initial investment will be recovered,' said Dominic Nixon, one of the three PricewaterhouseCoopers (PwC) Singapore partners who are the receivers for the notes.
'Without the negotiated settlement, the receivers would have to pursue a complex, costly and lengthy litigation process without certainty of recovery,' he added.
Not all the money from the sale of the collateral will go to the noteholders, however. The receivers must first pay an undisclosed sum to Lehman Brothers Special Financing Inc (LBSF), a US subsidiary of Lehman Brothers that was a counterparty to the various derivative contracts - interest-rate swaps, currency swaps and credit-default swaps - that were embedded in the structure of the Minibond note programme.
Those swap contracts were terminated by the receivers late last year to protect noteholders from further losses as the financial crisis worsened. But that action triggered an obligation to pay LBSF under international rules governing such derivative contracts.
Under the terms of the Minibond notes, the proceeds from selling the collateral must first be used to pay the cost of unwinding the swaps before repaying noteholders.
It is not known how much the collateral is worth, though demand for US corporate bonds has recovered strongly in recent months as risk appetite returned. Sales of US corporate bonds more than doubled in the third quarter compared to a year earlier, according to data compiled by Thomson Reuters.
In total, some $373 million worth of Minibond notes were sold to 7,800 retail investors through nine firms here, in nine separate tranches.
The settlement 'is the best available option for noteholders under the present circumstances', the receivers said yesterday. HSBC Institutional Trust Services (Singapore), the trustee of the notes, said it is 'satisfied' that the settlement is in the best interest of noteholders and has accepted the receivers' recommendation.
The settlement with LBSF does not affect any claims that investors are making against the firms that sold them Minibond notes, the Monetary Authority of Singapore said in a separate statement. Those investors who had earlier accepted partial settlement offers would have retained a portion of the notes, and will get to keep the residual value on those notes after the receivers have sold the collateral, MAS said.
The settlement relates only to Minibond notes; other structured notes that were also linked to Lehman Brothers, such as High Notes 5 issued by DBS Bank, are not affected by this settlement.
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Minibond saga nears closure with settlement
Investors likely to recover a part of their original investment
By CONRAD TAN
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
</TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Print article </TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>(SINGAPORE) Singapore investors who bought Lehman Minibonds can expect to recover part of their original investment in the next few months, after the receivers in charge of unwinding the structured notes reached a settlement this week that gives them full control of the underlying assets.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>The agreement ends a standoff that has lasted several months, and which threatened to turn into a lengthy and messy international legal battle among the different parties laying claim to the US corporate bonds that formed the collateral for the Minibond notes.Eight law firms across four different legal jurisdictions - Singapore, the United States, the United Kingdom and the Cayman Islands - were involved in the settlement, which took effect on Sept 28.
But it is still unknown how much money the noteholders will get back, and the amount is likely to vary considerably across different series of the Minibond notes, the receivers warned yesterday.
The exact sum recovered will be determined after the receivers sell the collateral - which they say may take several months, to secure a reasonable price.
The receivers said they had chosen an international investment bank to manage the sale of the assets, but declined to name the bank.
'This settlement provides certainty to the noteholders that at least some of their initial investment will be recovered,' said Dominic Nixon, one of the three PricewaterhouseCoopers (PwC) Singapore partners who are the receivers for the notes.
'Without the negotiated settlement, the receivers would have to pursue a complex, costly and lengthy litigation process without certainty of recovery,' he added.
Not all the money from the sale of the collateral will go to the noteholders, however. The receivers must first pay an undisclosed sum to Lehman Brothers Special Financing Inc (LBSF), a US subsidiary of Lehman Brothers that was a counterparty to the various derivative contracts - interest-rate swaps, currency swaps and credit-default swaps - that were embedded in the structure of the Minibond note programme.
Those swap contracts were terminated by the receivers late last year to protect noteholders from further losses as the financial crisis worsened. But that action triggered an obligation to pay LBSF under international rules governing such derivative contracts.
Under the terms of the Minibond notes, the proceeds from selling the collateral must first be used to pay the cost of unwinding the swaps before repaying noteholders.
It is not known how much the collateral is worth, though demand for US corporate bonds has recovered strongly in recent months as risk appetite returned. Sales of US corporate bonds more than doubled in the third quarter compared to a year earlier, according to data compiled by Thomson Reuters.
In total, some $373 million worth of Minibond notes were sold to 7,800 retail investors through nine firms here, in nine separate tranches.
The settlement 'is the best available option for noteholders under the present circumstances', the receivers said yesterday. HSBC Institutional Trust Services (Singapore), the trustee of the notes, said it is 'satisfied' that the settlement is in the best interest of noteholders and has accepted the receivers' recommendation.
The settlement with LBSF does not affect any claims that investors are making against the firms that sold them Minibond notes, the Monetary Authority of Singapore said in a separate statement. Those investors who had earlier accepted partial settlement offers would have retained a portion of the notes, and will get to keep the residual value on those notes after the receivers have sold the collateral, MAS said.
The settlement relates only to Minibond notes; other structured notes that were also linked to Lehman Brothers, such as High Notes 5 issued by DBS Bank, are not affected by this settlement.
</TD></TR></TBODY></TABLE>
