Martin Lee @ Sg
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Hope for Lehman Minibond Investors

After so many weeks, Lehman Minibond investors finally have some good news to cheer about. 

This concerns the finding of a new swap counterparty.

Two international financial institutions licensed by MAS to operate in Singapore (has on today) submitted to HSBC Institutional Trust Services (Singapore) Ltd their proposals to restructure the Minibond notes.

If accepted, their proposals will allow the Minibond to run until maturity. At this point, it is still premature to speculate the amount of capital that will be returned on maturity after this restructuring.

The details are being finalised at this stage and will ultimately require the approval of all relevant parties. As part of the deal, there will also likely be an exit clause for investors who do not wish to hold on to the Minibonds.

An independent financial advisor will be appointed by MAS within a week to advise investors on the pros and cons of the proposals.

In a separate announcement, Hong Leong Finance has decided to compensate in full (net of interest) Minibond investors who are 62 years or more at the time of investment and with not higher than primary school education.

Hong Leong Finance Announcement on Minibond

Maybank has also indicated they will have some form of compensation. Details have yet to be released.

Hopefully, this will set the stage for other financial institutions to follow suit.

More on this on Channelnewsasia:

Lifeline for Most Investors (Straits Times)

A Surprise from DBS (Today)

Hope Flickers for Victims of Lehman-Linked Notes (Business Times – access after 6pm)

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32 comments
Intheknow says 11 years ago

go read the thread on ml jubilee series 8 notes:

http://www.martinlee.sg/merrill-lynch-jubilee-series-8-notes/

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jespher says 11 years ago

Hi,

i have bought jubilee series 8. anxious to know fate of the notes now.

thanks

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original WS says 11 years ago

Another extract from Lucky Tan’s article titled “CDS – Weapons of financial mass destruction….” posted on his blog.

The banks’ move to compensate vulnerable investors first after they were urged by MAS to “do the right thing” has a few strings attached. Vulnerable investors will be asked to sign a statement to say that they will not participate in any lawsuits against the banks for mis-selling. The existence of vulnerable investors is the best evidence that widespread mis-selling has occurred. Divide and conquer. The best way not to pay everyone fully is to pay some people first – the vulnerable investors are called “deserving investors” in various press release. So what does that make the rest of the investors? Drag the compensation process, case by case, by then the protests would have died down – with the old aunties compensated, the sympathy of the public would wane and the govt will try to move on. Like I said in my earlier posting, our victims are lucky that the same product was sold in Hong Kong. There will be some pressure to apply resolution is arrived at in Hong Kong – if they compensate everyone there, hopefully everyone here is compensated. The Hong Kong govt has taken a hardball approach against the banks with investigations, threats of sanctions etc they have pledge to do everything they can to bring justice to the victims.

I’ve heard no such pledge from Lim Hng Kiang – just this denial of responsibility: ‘So MAS has never said that these are risk-free products or low-risk products or safe products”- Minister Lim Hng Kiang

For full article, go to
http://singaporemind.blogspot.com/2008/10/cds-weapons-of-financial-mass.html

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original WS says 11 years ago

This extract is from Lucky Tan’s article titled “CDS – Weapons of financial mass destruction….” posted on his blog.

“I think investors have to be wary of any solution in the minibond & high notes fiasco that involving having them hold those notes to maturity. It seems like a good idea on the surface because right now the underlying securities of the minibonds fetch a very low price – we will know what they are worth when the Hong Kong banks are done with the valuation in a matter of days. The logic is investors may stand a better chance if they are held to maturity. Please be careful with that because they valuations may be worse if held to maturity just like those GreatLink Choice notes – I can buy them now for $0.24 when they once sold for $1 – but you think they will be worth more upon maturity? I think investors should not stop pursuing their rightful compensation due to mis-selling even when a new swap counter party is found for the Lehman Minibonds. I know Tan Kin Lian is has referred a few possible the new swap counter parties to MAS. Please think about it carefully – banks who are guilty of mis-selling are still guilty of mis-selling – those risky products are still remain risky with new counter parties. I think while everyone is trying to help, they have to be careful with the solutions. The situation is likely to become worse with the recession, holding a risky product to maturity MAY result in a worse outcome than making banks buy back at the current market price. I believe the Hong Kong govt is trying to get the market value first, then use evidence of mis-selling to force the banks to compensate fully. It is very easily to slip up and let the banks get away once the counter-party is found. I hope everyone involved in helping these investors be very careful…..otherwise the investors will lose out and the banks will go unpunished.”

For full article, go to
http://singaporemind.blogspot.com/2008/10/cds-weapons-of-financial-mass.html

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Hazel says 11 years ago

Hi,

Can I know who should I contact to join in the request for an open forum with Maybank? I would also like to join in the filing of class action suit against Maybank. I have email to Mr. KC Mui but did not get any updates from him and I realised that some Maybank investors have already approached lawyer Leonard Loo.

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Jasmin says 11 years ago

If anybody have received offer of compensations from any FIs, please share (yes details omitted) on which product and FI involved.
Thanks.

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lalaland says 11 years ago

The fall of Lehman is totally unexpected. Even if someone is to ask you today, ‘will goldman sachs fall?’ your answer will still likely be a no. That my friend, is the basis of the minibond. A debt instrument relies heavily on its rating and consumer’s perception of that bond.

If it has been a Lehman share, no one would be asking for a refund.

And as harsh as it sounds, consumers should be aware of what they are buying (except for those misled into thinking the bonds are guaranteed or that it a fixed deposit, for instance.) It is simply not right for some consumers to wrongly accuse bank staffs of mis-selling when all they just want a refund for a bad buying decision. But if strong proofs emerged showing bank staffs have mis-sold the product, their licenses should be revoked as cautionary to other bankers.

Let’s brace the hard times with some dignity and grace.

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    Bad Dream says 11 years ago

    If we had bought shares and the organisation collapsed, we would have cursed our own luck and not press for compensation. This is given and a no-brainer. We are aware of this simple risk.

    However in this case, there are almost 10,000 folks from all walks of life – all saying the same thing – we had no idea it is a “debt instrument”. We had no idea it is mixed up with terms like “derivatives” “counter swap parties” etc. We had no idea this was considered a “risky instrument”. We were told that it was a safe product, like FD, capital protected if held till maturity.

    Given that the “selling” was so simple, does it make sense for us to ask more questions.

    I draw an analogy. You consult a doctor for a runny nose. He tells you it’s a common cold. Do you question whether you might have contracted nose cancer?

    Now then – does this sound like a large scale conspiracy – 10,000 folks without “dignity and grace” trying to “wrongly accuse banks staff of mis-selling?

    I leave readers of my comment to decide.

    Reply
    lioninvestor says 11 years ago

    Hi Lalaland,

    your points are valid to a certain extent, only that in this case, the Lehman Minibond is not really a simple debt instrument.

    If nothing had happened to Lehman and the reference entities, it is still possible for the minibond holders to lose a large part of their capital via defaults in the underlying securities.

    Reply
Kwan says 11 years ago

Good to know that there are two parties interested to restructure the Mini-bond. Even if no agreement is reached with either party to take over the swap contract, it does means the next step is to liquidate the underlying securities. One possible option is to maintain the Mini-bond as a US$ floating rate instrument and hold till maturity. As a Mini-bond holder, my interest, which I am sure is the interest of other investors, is to maximise our recovery. Liquidation of the underlying securities, which is likely to give us zero return, should be the last option.
I propose that a Steering Committee be formed to work with the trustee. I am prepared to be a member of the steering commitee and I know of at least another bond holder who is willing to be a member too.
Lioninvestor, can you please take the initiative to form the Steering Committee.

Reply
    lioninvestor says 11 years ago

    Hi Kwan,

    This looks like what HK5D is trying to do.

    http://www.martinlee.sg/minibond-track-b-catching-up-with-hong-kong/

    Perhaps we could work together.

    Reply
      kwan Chiew Choi says 11 years ago

      Hi Lioninvestotr,
      I have difficulty contacting HK5D. Can you help initiate a meeting of like-minded people? Acting as a group definitely have more impact then acting singly. We need to engage the Trustee, HSBC, as soon as possble to protect our interest.

      Reply
Kenneth says 11 years ago

Hi lioninvestor,

i) It is a requirement by MAS to do a risk analysis before promoting a high risk product like minibond to a customer?

ii) If the risk analysis is conservative or moderate and the FA recommeded Minibond, is this consider as Mis-sell which violated section 27 of the Financial Advisor act.

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    lioninvestor says 11 years ago

    There must be a reasonable basis when making any product recommendations, unless the customer opts out of receiving advice.

    Reply
VSL says 11 years ago

Hi lioninvesotor,

DBS made a statement today that goes “…Regrettably, our initial expectation of the worst-case scenario whereby investors will lose their entire principal investment amount is likely to materialise…”

I am very concerned about this statement by DBS. Does this mean that some investors will get back ZERO. This is totally unfair. How can DBS pay the old, uneducated investors 100% (or close to it) and pay 0% to other investors? Who are the likely investors to come under this unfortunate category?

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    lioninvestor says 11 years ago

    DBS has admitted that there was some cases where the selling “did not meet their standards”.

    As to who and how much they will compensate, we can only wait and see.

    Reply
Fury says 11 years ago

Even with the new swap counterparty, we still expose the risk of the reference entity and the basket of the underlying companies, so I think the new party will ask us to sign something so that when any default happens the next time, the investors cannot claim or sue them.

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Victim says 11 years ago

We need to make ure the FI do not compenate a small group of “vunerable” and then move on. The large majority have also lost a lot of their life savings.

Why are other FI keeping quiet – UOB Kay Hian, OCBC Securities, Philips securities, etc: Do the right thing!

With the pending buyout of Minibond, perhaps we should pursue to have the FI compenate the remaining amount lost after the buyout

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    Kenneth says 11 years ago

    I think MAS did mentioned that the rest of the FIs should follow suit while at the same time not to neglect the rest of the investors irregardless of age and education.

    Whatever the case, the 2 new proposals to take over the new swap guarrantor and counter guarrantor should be what most of the Minibond investors should look forward to. It will be a new proposal including an exit option for us.

    I think we should be lucky as Lehman brothers were the swap guarrantor and not the reference entity. A update from my FI on 14 Oct indicated that Jubilee Series 3 LinkEarner Notes has zero return. I believe DBS High Notes is the same.

    DBS on Straits Times mentioned some of them will have nothing back.

    This is truely a very bad lesson to learn from and my only wish is to take back the major part of my principle and call it a bad dream.

    Regards,

    Reply
      SWN says 11 years ago

      If an investor is offered and accepted a 70% settlement, I suppose the FI will take over the note holder’s rights and interest. Assuming a new swap counterparty take over Lehman’s position and continue the minibond until its maturity when it is redeemed at 100%, does that mean the FI will stand to make a profit of 30% plus the interest income for each year?

      Reply
        richard says 11 years ago

        Hi SWN,

        I would like to think that it works both ways. If the FIs offered you 70% settlement but at the maturity date it is only able to recover 40% (due to poor market condition) , can it then claim back another 30% from you plus interest for the upfront payment.

        Reply
        Bad Dream says 11 years ago

        SWN

        Exactly! That’s why everything is not clear at this stage. I think it may mean that we will not be getting back 100% back when the Minibonds mature under the new swap counterparty. I suspect if they give us back 70% we would be “lucky”. They would want to earn a fair bit from this. Maybe the figure will turn out substantially less.

        I wish MAS will make it clearer.

        KSH

        Reply
      sufferer of the bomb says 11 years ago

      cannot complain too much, can get back even 20 percent already lucky. MAS has indeed push hard on this issue after noise were made.

      even if new bank that take over this product and want to shed off our quarter premium to 2 percent and at maturity if we are given 70 percent also a good deal.

      so if u are given an inch dun push for a yard.

      Reply
    sufferer of the bomb says 11 years ago

    i believe all other institution waiting for tommorow decision as to which white knight going to take over and what is the terms before they make a decision as to how to effect compensation if proven we have strong case.

    Reply
Bad Dream says 11 years ago

So if you are age 78 and with secondary education you are out of this group? That is very worrying for me as my mum is not so lowly educated.

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Jasmin says 11 years ago

Banks are not charitable organisations. Where comes the money for compensation. Perhaps the highly vulnerable group is the smallest group, so is the easiest to manage?

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    #Jason58 says 11 years ago

    This is a good & honest sign for the FI to owe up. (at last they have to admit their mistake. After more than a months of deny & argues thought that they know the product they sell, now the truth is show right.

    In order to have an organisation to establish and survive for long in this world, honesty and ethical in their practice should come first.

    One good example, how the 158 years of history gone down by the greed, dishonest & unethical of Lehman Brothers Management. What their success in the past will be named of how they conned from. Organisation die with the bad remarks….sad.

    Our FI is seem to make up the situation to the right track now. They should always bare in mind that without the investors support, can they run their bank?. Their survive much depend on the investors rather than their share holders. Money from the investor are the stock & suppliers of bank’s operations, without stock, can they trade with their brand?.

    This is just my simple minded opinion.

    Regards

    Reply
SWN says 11 years ago

I thought according to MAS, the vulnerable group should be those above 55, why is HLF setting a different definition? I think wonder those HLF investors who are between 55 – 61 should raise the issue with MAS.

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Jasmin says 11 years ago

The so-called vulnerable group is those aged 62 AND with only primary school education deserve full compensation. What about the rest? Should not the latter deserves some form of compensation since I have been misled?

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    Kenneth says 11 years ago

    Hi,

    One step at a time. Timing is everything. First govt announced $150 billion deposit guarrantee then DBS/Maybank/Hong Leong Fiance pay in full to vulnerable group. Topping it off with 2 proposal for the rest with exit option for investors.

    For my minibond 3, Lehmann was not even part of the 6 REs. The above banks lead the way and I believed the rest will follow.

    my decision:

    i) Wait for independent party assessment of 2 proposal. Hopefully the option to exit can bring it the majority of my principle back.
    ii) Wait for FI conclusion after my 2 interviews.
    iii) If (ii) not satisfy, which I believe so, go to FIDReC. My case is that it was a totally risk mismatch.

    For gain opportunity, DBS share drops to $11.60 last 2 days. Abnormal as it is usually on par or slightly higher then UOB. During SARs period, it drops to $9. With the $70-$80 writedown, next few Quarters earning will be badly hit especially with recession in Sgp. At single digit share price, it is worth considering to invest for mid term. Just my opinion.

    Regards,

    Reply
Lew says 11 years ago

HI Lion investor,
From the news tonight, HLF finance willing to compensate full amount minus the interest that had given to the oldfolks and low education parties,is that true ?Thank you.

Reply
    lioninvestor says 11 years ago

    Yes. I will be posting it up in a minute.

    Reply
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