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Hi,
I recently received my quarter dividend interest paid-out on Merill Lynch 3 year structure notes products from UOB. I am not too sure whether my investment series had anything to do with the mentioned product series ‘8’ or ‘3’.
I had make several visits to the bank and was repeatedly quoted the same statement ‘ things are under control” after the acquisition by BOA despite i wanted to cash out my investment after the 1st visit to the bank when it was priced at 0.95 +/- at that time. To tell the truth, I am a very ‘fixed deposit’ person and before i signed up for this investment and i obviously seek clarification on the product risk-level. I was clearly told by the the senior banker, the products is capital protected and the risk level of this product “is as good as to the local bank can go bust.” and obviously, i felt secured to go for it.
However, with this shocking news each day we facing, i certainly have my fear and i am beginning to lose faith with what my bank is telling me now.
Can anyone advised me what i should do for now and next ?
Thanks & Rgds
Tay
Hi Tay,
Before I can advise you further, you need to tell me/us what ML product you are invested into. This is because different products have different risks.
Look at your termsheet/prospectus. What is the title?
Merrill Lynch 3 year xx xx xx
But going by the looks of it, if the buyback price was 0.95 when the BOA acquisition was announced, I doubt it’s a dangerous product like Jubilee Series 3. It should be more like Jubilee Series 8 or “Merrill lynch SGD 3-Year Principal Protected Fixed Income Notes” which I had explained to PPL in one of my above posts. (Do a Ctrl + F search for it)
If yours is the ““Merrill lynch SGD 3-Year Principal Protected Fixed Income Notes”, it is as safe as Jubilee Series 8. And it is indeed very ‘fixed deposit’ like.
Cheers,
Intheknow
Hi Intheknow,
If you have S$ cash and do not wish to place in bank/finance co to earn low fixed deposit rates, what structured products/bonds are there currently available but still relatively safe?
TanJ
Reply
Ha….that is a very good question. Any other place to park spare cash in this financial climate..? Even our Aussie cash FD has been hit so badly. So… Intheknow, any tips?
Won’t it be wonderful if we have a crystalball? Ha!
Hi May and TanJ
What’s the time horizon and % returns are you all looking at?
ReplyHi All,
If I have spare cash now, the following are my options in order of risk (lowest to highest):
1. Fixed deposits with ‘riskier’ banks like BEA or Maybank. Since deposits are now guaranteed by SG government till end 2010, there is little risk.
(About 2%)
2. Structured products like Jubilee 8 which are very ‘fixed deposit’ like in my opinion.
(About 3%+)
3. Foreign currency fixed deposits with ‘riskier’ banks like Maybank. Foreign currency deposits are now guaranteed by SG government, so there is little risk. Take note that even if AUD rates are 5-6%, the bid/ask spread is like 3%. So you would only be earning about 3% interest p.a. even if there is no currency movement.
4. OCBC or UOB preference shares. With a dividend yield of 5%+p.a., at with current low prices of $8X, I think further downside is unlikely. By buying into these preference shares, you have the potential to earn a higher yield of 5%+, and you may actually enjoy some upside on the preference share price itself. Of course, there is always the risk of OCBC/UOB not paying ordinary share dividends and hence can choose not to pay preference share dividends. And yes, there is always the risk of OCBC or UOB going bust. Preference shares will not be guaranteed as they are NOT FIXED DEPOSITS.
5. Direct equity investment into value SGX or NYSE stocks. I am a big fan of SGX and NYSE stocks. There is plenty of value out there, although I am not going to state which are the stocks I think are good. This can differ from person to person so I will leave it to the individual to choose. Do note that this is of course the most dangerous option as you could lose a lot of your principal.
I do not like unit trust or managed fund products, thus they are not on my list. I don’t see the point of paying a fund manager no matter they make or lose money for you. And it’s a bit like a black box. You don’t know what they are investing in until it’s too late. Suddenly they could announce they have holdings in counters like Lehman, Jade, CAO, etc… and you’re screwed.
Reply
Hi,
i’ll got my latest pricing from standard chartered at 85%. I’ve been getting 85% ever since the 2nd release of pricing, which seem lower than what i’ve read about citibank quote from here. Yet my relationship manager says they will process the unwinding for free. Not sure if there’s a document i can obtain from them if i choose to unwind to make sure if they really didnt charge the process fee.
Like sam. i’ve put in a large sum hence losing 15% can be quite an amount. But i still have this struggle of that ‘what if’ even i’ve read what intheknow have explained, but i must confess his explanation does make me sleep a little better this two weeks..
Not sure if any one write to FI for the mis-selling about J8? those that’s in the news are mostly those link to Lehman brothers…??
Reply
Hi Sam,
The latest , based on last week’s pricing is 86%
( from Citibank)
I’m not sure but I think the rate will be better after Americans vote their new President.
Hi guys n gals,
Anyone has the latest buy-back price for JB8?
I read almost all the posts in this string… now is like an angle and devel by my head… 1 telling me to bite the bullet and sleep in peace, 1 telling me to hold on and gamble with the seemingly-still-not-the-worst-yet financial situation. But now I can’t figure who is telling me which action to take LOL…
Anyway I’ve put in a huge sum into JB8 and losing 15% is quite unthinkable. But then, even with all the logical “assurances” here and there about the structure of the note and the situation with ML, there are still all the what-ifs. Aiya… angle n devil at work again.. grr……
ReplySam,
If the risk is too high for you yet the loss is not tolerable, have you considered whether it’s possible to sell part of the investment?
Maybe you want to check whether this is possible and consider it as one of your options.
Reply
Hi Intheknow,
How about Accumlator Note Series 1 due 25 Jan 2010 issued by Societe Generale ? Does it work the same way as MiniBond, DBS High Notes, JB3 or Jubilee Series 8? Any underlying securities ?
Here’s the link to its prospectus/term sheet :
Thanks,
Lyne
Hi Lyne,
Accumulator Note Series 1 does not work the same way as Mini Bond, DBS High Notes 2/5, or Jubilee Series 3. There is no underlying basket of securities whereby default in more than x number will cause a loss in principal. The structure of a basket of securities is usually found in Collateralised Debt Obligation (CDO) structures like First to Default types which Mini Bonds, DBS High Notes 2/5, and Jubilee Series 3 are.
Accumulator note Series 1’s ‘backing’ mechanism is more like Jubilee Series 8. You are only taking the risk of the Issuer (in this case Societe Generale) defaulting. But for the Accumulator Note Series 1, the worst case (excluding issuer default) is you get 0% interest (if commoditity prices didn’t move within the interest accumulation range) and 100% principal back. For Jubilee Series 8, there is no worst case (other than issuer defaulting), investor will be paid fixed and guaranteed interest of 3.15% p.a. (as long as issuer does not default).
Hope this reassures you.
Regards,
Intheknow
Hi ‘InTheKnow’
I posed a question to you today at 12.54 p.m. but forgot to address it to you . Sorry about that.
Hope you will reply.
Thanks
Amy
Just wondering if you could clarify the following:
(1)When I purchased JB8 Notes, the RM at Citibank simplified things in this way-that I lend my money to ML and they pay me an interest ( coupon ) of 3.15% per annum , to be paid quarterly. Like you said, I am an unsecured creditor.
(2)My question is ‘ What does ML do with these securities? Do they just hold on to them for 2.5 years or are they traded in Wall Street?’ How do people then buy and sell these securities ?
You see, I watched the news on Channel NewsAsia and sometimes CNN and there’s so much infor on stocks and shares but none on securities.
Many thanks
Amy
Hi Amy,
Jubilee 8 structure is like this (simplified of course):
1. Investor (you) gives money to Jubilee Finance Ltd.
2. Jubilee Finance Ltd give the money to Merrill in exchange for a senior unsecured bond issued by Merrill.
3. At quarterly intervals, Merrill pays Jubilee Finance coupons which are transferred to the investors.
4. At maturity date, Merrill redeems the senior unsecured bond by paying Jubilee Finance 100%. Jubilee Finance then pays the investors back their 100% principal.
So unlike Mini bond and DBS High Notes and Jubilee Series 3, there is no underlying basket of securities. There is only the senior unsecured bond issued by Merrill and the money collected from investors like yourself.
That’s why I said Jubilee Series 8 is actually a very ‘fixed deposit’ like structure with no major complications. You are only exposed to the risk of Merrill defaulting.
ReplyOk I found it off SGFUND.COM forum:
—quote—
– Credit-linked to 135 reference entities (Approx 80% is BBB rated, 20% A rated)
– 10 yrs tenor
– Callable in March ever year
– Principle protected upon maturity
– Yield is subjected to the no. of credit events:
0 default = 125% returns
1 default = 107.2%
2 defaults = 89.3%
3 defaults = 71.4%
4 defaults = 53.6%
5 defaults = 35.7%
6 defaults = 17.9%
7 or more defaults = 0%
My thoughts… Clearly this is a bundle of unwanted bonds being re-packaged into a CLN… and marketed as a potential 12.5% return per annum… “safe”… and principle protected financial product… Of coz, the target audience will be those aunties and uncles again… Sigh…
A quick check at S&P average default rates for a 10 yr BBB bond is 6.1%… If history is any guide… the realistic total return for this CLN at best is 17.9% (6 defaults)… which means its 1.79% per annum… Relatively, a risk-free 10 yr SGS bond will give you a yield of ard ~3.4% per annum.
I dun think its tat difficult for 7 out of 135 reference entities to default in a time horizon of 10 yrs… This CLN is as, if not, more risky than equities in my humble opinion…
All in all… the risks taken does not justify the rewards…
—unquote—
looks like the worst case scenario is you get back 100% of your principal after 10 years with no interest at all. But I haven’t seen the prospectus/termsheet so I could be wrong.
ReplyThank you ‘Intheknow’. Anyway I was already of thinking of cashing out before reading your comment. It is only a small sum, (the minimum needed to get the ‘special’ FD rate) Hopefully the buyback is still not too bad. Once again, thanks for your take on it.
Reply
i was told by the rm in hsbc that the worst scenario for investing in citrine golden cushion notes is getting back the principal amount without any equity linked coupon at the end of the 2 years. can i file a compliant against the bank for mis-selling?
Replydo you have any evidence that your RM did not warn you about the default risk of ML?
i am sure in the prospectus as well as the in 2-3 page termsheet, there would be a phrase whereby it says principal protection is by ML.
ReplyBelow is an extract of the email from the RM:
“….It is 100% principal guranteed at
maturity. …Since
its launch on Monday response has been very good. I belive this instrument
will be a very good option for you as compared to a normal savings account
if you do not have any use for you funds in the next 2 years and you dont’
like to take excessive risk.”
Is this sufficient evidence of mis-selling? He knew that I am not a risk taker and yet recommended a product that may become worthless overnight. If he has highlighted the default risk of ML, I would never have committed to such a product!!
ReplyHi Sleepless,
I don’t mean to sound biased, but you cannot expect to take no risk at all in exchange for returns. Even putting money under your pillow may result in it being stolen.
Even a pure fixed deposit at a bank, say DBS, may suffer losses in principal should DBS go bankrupt. (Of course, I am ignoring the recent announcement that all SG bank deposits are now guaranteed till end 2010).
To be fair, I maintain my opinion that:
1. Jubilee Series 8 is indeed a ‘safe product’. Buying this product definitely cannot be considered as taking excessive risk. (Maybe if this was Minibond, High Notes 2/5, or Jubilee 3, I may agree that there is excessive risk).
2. Jubilee Series 8 is not a complicated product.
3. It’s true that it is 100% principal guaranteed (by Merrill) if held till maturity. This clause means that the guarantee is only as good as Merrill’s creditworthiness. Just like Mr A guarantees Mr B’s debt. If Mr A defaults, the guarantee is as good as worthless.
Hi ….really glad I found this website as it has been informative. No one has mentioned Jubilee series 1 link gain notes. Bought this as a package for a special interest for Fixed deposit. (ie. in order to get the special higher FD interest, you have to buy the Jubilee series 1) Anyone has a take on Series 1? So far I have not received any letter from Citibank about it.
ReplyDo you have the prospectus/term sheet for Series 1?
Anyway, no letter often means good news! =)
Reply
after seeing all the comments from fellow mates, i’ve decided to hold till maturity.
ReplyHi Lion The Investor,
Just wondering if you could elaborate on this:
(1) “InTheKnow” said that these Jubilee 8 Notes are not linked to ML shares.
My question is if there there is a meltdown at Wall Street , will there be an indirect repercussion on JB 8? If so, will it lower the value of JB 8.?
(2) What factors, if any, will raise or lower its value?
Right now, there is much fear about Merril Lynch and because of this , the value is now at 85% , a drop from 86.5 %.
“IntheKnow” also mentioned that banks are capitalising on this fear.
What is your take on this?
Many thanks
Ali
The value of JB8 is quoted by ML. So it is really up to them.
If they want to hold on to your money and dissuade you from redeeming, they can price it lowly.
Reply
Hi In-The-Know et al,
I would just like to know now with the transition of ABN Amro Van Gogh Preferred Banking account into RBS’s Royal Prefered account, where our Jubilee Series 8 note is maintained, is RBS backing up this product which is distributed by ABN Amro or is the principal at maturity still dependent on Merill Lynch as backed by BOA?
Another question is with the protection announced by the Singapore govt: “In a joint press statement issued by MAS and Ministry of Finance yesterday night, the Singapore government announced that it would guarantee all Singdollar and foreign currency deposits of individual and non-bank customers in licensed banks, finance companies and merchant banks.
Is this product(Jubilee Series 8 notes) protected up till Dec 31 2010?
Thanks in advance for your advise!”
cheers
Reply1. Whoever is holding your note has nothing to do with the performance of the note. Whether it’s ABN or RBS, they are merely custodians of the note. Thus, the performance of Jubilee 8 is dependent solely on the Issuer, which is ML (in future BOA).
2. Structured products will not be guaranteed by Singapore government. Only pure fixed deposits and foreign currency deposits will be guaranteed.
ALL > PLEASE BE VERY CAREFUL. DUAL CURRENCY PRODUCTS (some banks still call them Dual Currency Deposits) ARE NOT COVERED UNDER THIS SINGAPORE GOVERNMENT GUARANTEE.
Dual currency products are whereby an investor chooses a currency pair. A high rate of interest is paid but the investor will get returned their investment in the weaker currency at maturity.
Reply
Hi InThe Know
Thanks for your effort and patient in answering so many questions that fellow MLJ8 notes holders posted.
I have to say that I have benefited a lot from fellow investors and especially your professional knowledge.
Do keep them coming.
ReplyHi Intheknow,
I invested S$100k on MLJ8 through Citibank.
After reading your analysis of J8 and with BOA onboard supported by the US govt, I feel very much more assured.
I will take my chance to keep J8 to maturity 9 January 2011 and enjoy the 3.15% per annum fixed rate.
ReplyHi all,
I’d like to thank Lion the Den for providing the platform for Jubilee 8 holders to communicate with each other. I read both remarks and opinions by ‘Hopeful’ and ‘In the know’ and now I understand much more about the product.
I checked with my RM at Citibank . The pricing ( redemption price )from Merril Lynch is available on Thursday but she said that it will take 3 to 4 days for her to access the indicatice value. Last week, it was 85%. This week’s pricing will be released by Merril tomorrow.
Reply
Hi,
I just checked with my RM yesterday on the buyback rate.It s 85% now. It seems to be dropping each day.
I have some concerns. When BOA agreed to takeover ML, do we know what is the terms and conditions? Is it stated that BOA must take over the Julibee Notes Series 8? Can BOA refuse some assets of ML? My concern is that the merging process is not complete till sometime next year. So along the way, can something happen and the deal breaks down? Where does Jubilee Global Finance Limited comes in?
Say before the merger completes, the deal breaks down and the notes got defaulted. Can we still get the bank to compensate us like what is happening now? Do we have grounds to say that we are mis-led by our RM into buying the notes? Can the bank turn around and say we have ample time to redeem the notes but we did.
Looking at Jonh’s post, the penalty increased from 13% to 15%. My questions is how/who determine the penalty? There is no way to find out what is the penalty except through the RM. Does it increase continuously or fluctuate with market conditions? Is there a possibility that it will increase pass 50%?
What about taxation? If there is tax imposed on the investment, will it cause an early redeemed. I remember I asked my RM what is the meaning of “..the Notes is redeemed early due to taxation or other reasons..” I was told something about the money is placed in some country where there is no/very little tax. With the current condition, can the country change their tax policy and this in turn creates taxation redemption?
I bought the Jubilee Notes Series 8. When my RM highlighted to me the risk, I asked what the chances of default are. My RM told me that ML is a big company and it is quite safe, looking at the performance of past series of the Jubilee Notes. I took her words for it and invested in it in June. I don’t blame her because I seriously don’t think ML will have any problems. But 2-3 months down the road, LB is history and we have all these problems. Only 3 months passed and there are about another 27 months to go. I felt it is quite a long time to wait for the investment to mature and give out back that 3.15% of return. I requested for redemption at 13% penalty.
ReplyHi Sylvestor,
1. The current takeover agreement is BOA will takeover all assets and liabilities of ML. Of course as you correctly pointed out, all agreements can be subject to change until it’s finalised. However, even if the agreement breaks down, you cannot assume that ML will default automatically.
2. Jubilee Global Finance Limited is like Constellation. It’s a thinly capitalised special purpose vehicle incorporated in Cayman Islands for the purposes of holding/facilitating the Jubilee notes.
3. I don’t think you can make the same ‘mis-led’ arguments about Jubilee Series 8 as per Mini-bond or High Notes 2/5. Jubilee Series 8 is indeed NOT a complex instrument. It’s just credit linked to ML (BOA in future). If they default, your principal will be affected. It’s just like a fixed deposit with say UOB. If UOB defaults, you may not get back 100% (of course with the government blanket guarantee till 2010, your fixed deposits are now 100% safe)
4. The decision whether to early redeem the Jubilee 8 notes now at a 15% loss is entirely yours. You cannot turn around and say you chose not to early redeem just because your RM assured you.
5. The buy-back price is a ‘fair’ price determined by ML based on current market conditions. Since the market is now ‘fearful’ of ML linked products, the buy-back price is naturally low now. No one can predict if the buy-back price will drop further. Of course, if ML defaulting is imminent, the buy-back price will drop even further.
6. The clause on taxation can be found in almost ALL structured products’ termsheets. Structured products are commonly issued by special purpose vehicles in tax haven countries like Cayman Islands. The viability/profitability of these notes are dependent on Cayman Islands not imposing any taxes on these special purpose vehicles. Of course, these countries can choose to impose taxes at any point in time. This will lead to potential early redemption of all structured products issued by those special purpose vehicles. My personal opinion is that these tax haven countries are unlikely to impose taxes anytime soon. This is because these tax haven countries rely a lot on investors setting up companies in their countries. A main source of income for them is financial services for these companies. By imposing taxes, these companies will likely withdraw from those countries.
7. It’s true that ML is a big company and quite safe based on its credit rating. To be fair, Lehman Brothers is considered as a safe company. You cannot say that a ‘safe’ company can never go bankrupt. It’s just unfortunate that all the unthinkable events are happening. Do understand that we are currently in one of the worse financial crisis in human history. We are in a situation worse than 911, SARS, and 97 Asia financial crisis.
I would like to highlight my analogy once again. Is airplane travel safe? Most people would say it is. Just because you died in an airplane crash doesn’t mean you can blame the airline for misleading you that air travel is safe.
Reply
Hi
I spoke to Citibank RM and was told J8 is a commercial paper bond and the credit rating of BOA is AA and ML is A+ by Moody. Based on the rating, the J8 is still safe unless the 4 things happens ie
(a) an Event of default under the notes
(b) the securities being repaid early for any reason for example because there is a an event of default under the securities or for tax reasons.
(c) the Swap Agreement being terminated early or
(d)the Caymens island imposing tax on the issuer or on payment under the notes which the issuer is unable to avoid.
Also were told that the outlook of J8 with the merger of BOA/ML, our Govt’s investment + Fed 700B bail out, J8 seems to be stable >> pl adv is this correct ??
What does the credit ratings mean and its significant ??
Also was told the BOA will be meeting its shareholder in Mid 08 to decide on the merger. What will happen to our J8 investment if the outcome of the meeting is not to take over the J8 ??
Reply1. Yes. If the BOA takeover of ML completes successfully, Jubilee 8 will be safer as BOA will take over the assets and liabilities of ML. Thus Jubilee 8 is now guaranteed by both BOA and ML.
2. Credit ratings indicate the likelihood of a company defaulting on its obligations. AAA is best.
3. If the takeover fails, then ML is back to being standalone. This does not mean that ML will definitely fail. It will depend on whether it is able to survive on its own and whether US government will let it fail like Lehman.
Reply
Hi Lion Investor / Intheknow,
I am also an investor for the Jubilee series 3 and now cannot get back even one cent, i had bought through my friend who opens an finance company. He told me that he has about 7 clients who buy this from him, and he himself also didnt know that it was such high risk, and that the product provider didnt state in the prospectus that the risk is high.. and now he say his company is preparing to write into merrill lynch and MAS to ask for compensation. Pls advise me what should i do ? Should i write in myself ? or it will be more powerful for him to write on behalf of all 7 of us ?
Reply
Hi Alexis, thanks for sharing your experiences at Citibank. My buying into Jubilee 8 arose from similar circumstances as yours. The unfortunate truth I suspect is that the RMs themselves failed to understand the notes themselves and actually thought they were “safe” investments.
The tardy attitudes of the Citibank RMs in such a sensitive investment climate is unforgivable. Why should customers have to bear the inconvenience of tracking down to one of the Citibank branches during office hours to have our pressing queries heard merely because our purported “relationship manager” has either gone AWOL at the first sign of a distress telephone call or has been so ill-informed that they disconnect their phones in fear of not being able to provide rationale answers???
I’m not biased against all RMs as I have a couple of good friends who are RMs of other banks. They are responsive to my queries and are highly efficient.
Whilst banks expect their RMs to sell and not to educate; it is within the reasonable expectation of investors to expect professional after-sales services, including elucidation of the workings of complex structured products and detailed knowledge of unwinding procedures. Surely, this is to be expected, after all, they had no difficulty with the initial purchase procedure!!!
Intheknow, has also demonstarted much knowledge here and should applauded & held as the standard expected of RMs selling structured notes. Get rid of the wet- behind-the ears graduate who is just passing off as a RM!
Reply
Hi Intheknow/Lioninvestor,
Can tell me more about the DBS Honey Account ? Have called DBS many times and to date no one respond to me.
thks.
ReplyDBS Honey Account appears to be an Equity Linked structured deposit.
Once again, please post prospectus/termsheet for me to have a look before I can advise further.
Reply
hi !
Whats your recommendation if we are still holding it.
Last week the penalty was 13 % . This week is at 15 %.
Need yr professional advice.
Rgds,
Reply
HI Intheknow,
Thanks a lot for your help to all the people here. This can be a silly question, but I wonder if you could explain what “ML (BOA in future) defaults” means.
I googled the term and found that “Default may occur if the debtor is either unwilling or unable to pay their debt…”.
So BOA can simply choose to be *unwilling* to pay its debt when it no longer likes the notes, and then the Jubilee 8 notes will be redeemed early and we will lose the principle?
Replyno worries. this is not a silly question.
Currently, ML is standalone. Thus, all the Jubilee Series 8/9 and Citrine notes are issued and guaranteed by ML only. So if ML defaults on the notes, you can only go after ML’s assets.
In future, when the takeover by BOA completes, ML be part of BOA. BOA will take over all assets and liabilities of ML. Thus, this means that your note is now guaranteed by ML as well as BOA. If ML defaults on the notes, then you can go after ML’s and BOA’s assets.
On your question on why a company defaults…
Companies don’t just default because they are ‘unwilling’ to pay debt. For large companies like ML and BOA, by wilfully choosing not to pay debt when it can would affect ALL its other debt.
A simple wilful default on Jubilee 8/9 or Citrine just because BOA doesn’t like the notes will cause ALL the debts of ML/BOA to immediately become repayable. Do you think ML/BOA will let that happen?
Large companies only default when they really cannot AFFORD to pay its debt, either repayment or interest payments. When this happens, in US, they file for Chapter 11, which is what Lehman did.
ReplyI also received letter from CITIbank, can anyone help to explain the implications?
Reply
HI Intheknow,
thanks for all the useful infor.
Would like to know if all Citrine notes are the same as what u have mentioned earlier?
i have bought Citrine all weather booster notes. Is it the same as J8?
http://www.martinlee.sg/citrine-all-weather-booster-notes/
thanks
ReplyCitrine Golden Cushion and Citrine All Weather Booster both have the same structure as Jubilee Series 8/9.
All these notes will be redeemed at 100% by ML provided ML does not go bust.
The main difference between Citrine and Jubilee 8/9 is in the amount of interest the investor gets paid.
Jubilee 8/9 guarantees a fixed amount of interest that will be paid as long as ML doesn’t default.
Citrine (both Golden Cushion and All Weather Booster) guarantee a certain amount of interest (less than Jubilee 8/9). There is a ‘gambling’ feature whereby the investor can potentially get a large interest payout or none at all under the ‘bonus interest’ portion. Do note that even if the bonus interest portion is 0, investor will get paid the guaranteed interest still.
ReplyDear all juilee 8 investor
did you receive a letter from your bank on Principal Protected Structured notes. I receive from Salman Haider, Wealth Management Head from Citibank >> see below and hope someone can explain in simple terms or the legal implications :
PRINCIPAL PROTECTED STRUCTURED NOTES
GIven the recent credit events in the markets, customers holding structure product investment have seen significant price movemets in their investments. We hope this letter addressed some of yr concerns & we wouldlike to assure you that we will keep you informed in market events to help you stay updated.
As you are aware Principal Protected structure products have an underlying “bond/money market component” and this bond/money market component is valued based on market interest rate and the issuer’s credit outlook. With the deterioration of the liquidity and credit conditions in the market, the cost of borrowing for financial institutions had gone up considerably and this in turn has resulted in a lower valuation of the bond/money market component. These movements have consequently lower the Net Asseet Value or the marked to Market value of these structure products.
It is important to note that the value of the structured products may well change during the tenor of the producti as is the norm with any security, but if held to maturity the principal is protected by the issuer as are any guranteed returns. The return of principal on maturity and guranteed returns, if any, are subject to the risks highlighted in the issuer’s offering documents, a copy of which you would have received at the time of subscriptions.
We hope the conceted effort across various central banks will improve the liquidity concerns amongst bank. This hopefully will result n the expected corresponding improvement to the value of the bond.money market component of structure products.
As mentioned previously, we will continue to keep you updated on market information. Pl note that any market information we communicate to you is intended to assist you in marking your decision regarding actions you may wish to take in respect to your investment: we are not acting in fiduciary capacity or rendering you any financuak advice. If you have legal or tax queries relating to your investments, you should consult with your legal and tax advisors accordingly.”
ReplyHi FirstTimer,
What the letter is trying to say is the Valuation of the Principal Protected Notes (such as Jubilee 8/9) will move up and down based on market perception of the Issuer.
Since now, everyone is fearful of ML, the buy-back price of the note is at 87%.
However, as the note is principal protected, it will be redeemed by ML at 100% provided ML does not default.
In essence, the letter is saying you can ignore the Valuation of the note as long as you hold the note till maturity and the Issuer doesn’t go bust.
ReplyI believe that there are a number of investors who have complained about Jubilee Series 3 since they lost everything (the note has been early redeemed at zero value).
What’s there to complain about Jubilee Series 8 or 9?
1. It has not defaulted.
2. It does not have the same risky structure as Series 3, High Notes 2/5, or Lehman Minibonds.
3. It’s a plain almost ‘fixed deposit’ structure whereby the investor will only suffer a loss in principal if ML (in future BOA) defaults. The only difference between Jubilee 8/9 and a fixed deposit with ML/BOA is you are ranked as a senior unsecured creditor rather than a depositor.
4. There is no ‘pool’ of 100 securities where the investor will suffer a loss in principal if they default. Jubilee 8/9 is just taking on plain simple ML/BOA credit risk.
Reply
thank. intheknow,
I still think DBS is responsible for not disclosing all the risks to us, how can they not include any scenarios or formula for us since the risk of CDO is so serious as to sweep away all our money.
And, now that they did not determine the securities at the point selling the product, they should always keep in mind we investors only got a 4% interest, we could only shoulder a risk equivalent to the return, how can they take all our money to buy CDOs to miximise their profit? as said in the pricing staetment, they should buy several series of Note, including asset-backed product to secure their obligtion, not only telling us that Constellation’s obligation is at risk now.
Besides, the sayin of “credit risk of Constellation” is also misleading. To us layman, it means we can get back our money only if constellation is not defaulted while Constellation is part of DBS.
ReplyJust be aware that Constellation is not part of DBS.
Constellation is a special purpose vehicle incorporated in the Cayman Islands for the purposes of holding the securities under the Note.
Constellation is NOT guaranteed by DBS nor will it follow the credit rating of DBS.
My personal opinion is that DBS did not CLEARLY HIGHLIGHT the risks of the 100 securities to the investor. The risk of the 100 securities should have been boldly highlighted along with the reference entities somewhere in front.
However, the details were indeed buried within the thick prospectus in the pages I highlighted in my above posts.
Thus, you cannot DBS failed to inform since they did provide the prospectus containing all these details to the investor.
ReplyOnce again, I would urge holders of Jubilee Series 8 and 9 to be calm.
Think over it properly.
Jubilee Series 8 and 9 are NOT like Jubilee Series 3, DBS High Notes 2/5, nor Lehman Mini-bonds.
You will only suffer a loss in principle for Jubilee Series 8 and 9 if ML (in future BOA) defaults.
Seriously, if I had a couple of million dollars spare cash, I would setup an investment holding company and offer to buy in all Jubilee Series 8/9 at a price higher than the ridiculous 87% that the banks are quoting for buy-back now.
The banks are just capitalising on your fear! Come on, 87% buy-back price is ridiculous for this sort of product.
DISCLAIMER: I MUST ONCE AGAIN STATE THAT THESE ARE MY PERSONAL VIEWS. DO NOT RELY ON MY VIEWS TO MAKE YOUR INVESTMENT/SELL-BACK DECISIONS. I cannot predict with 100% accuracy that ML (in future BOA) will not default.
ReplyFor Jubilee Series 9, please note the following!!
“Neither Temasek Financial (I) Limited nor Temasek Holdings (Private) Limited has consented to the inclusion of such information in this document.”
This means that Temasek IS NOT ENDORSING THIS PRODUCT. Please do not misunderstand. Temasek never said that this product is good or safe and it definitely does not guarantee this product!
1. Jubilee Series 9 is similar to Series 8. They are very ‘fixed deposit’ like and you will suffer a loss in principal only if ML (BOA in future) defaults.
2. All the mambo jumbo you see about Temasek being mentioned is only making referring to the bonus coupon portion. Jubilee Series 9 pays a fixed interest rate of 3.20% p.a. There is a POTENTIAL bonus coupon of 0.1% at the end of 2.5 years if Temasek does not default on a reference issued bond. This Temasek issued bond has NOTHING to do with Jubilee Series 9 other than for the bonus coupon determination.
Jubilee Series 8’s bonus coupon is dependent on SGD Swap Offer Rate being in the range of 0% to 5% at Maturity Date while Jubilee Series 9’s bonus coupon is dependent on Temasek not defaulting on a reference issued bond (unrelated to Jubilee Series 9) before Maturity Date.
3. There are a few sentences below that on Temasek which is just publicising the fact that Temasek has bought ML shares and plans to buy more. Once again, this has NOTHING to do with Jubilee Series 9 other than trying to try people that Temasek has confidence in ML (since it is holding ML shares and going to buy more).
Reply
Intheknow,
Thanks again for your valuable info. I believe by now, many of us must have a clearer picture of what Jubilee notes is all about. Of course, credit to you Intheknow and many who have shared.
At this point, many of us are considering whether to hold on to the notes or to get out at a loss.
But has anyone lodged an official complaint to MAS, Fidrec or the FI with regards to Jubilee notes (8 or 9 or etc)?
Any views or comments on this action?
Reply
Suggest you take time to chew on the clarifications & comments to queries over the past weeks, esp the ones by “”IntheKnow”.
Everyone including myself, wished we have a crystal ball on hand. Unfortunately, for now, we’ll just have to take this as another casino gaming … odds against the banker?
ReplyWhen I enquired on the J8, the RM told me they are safe and “principal protected” and they said that Temasek is also investing in ML. Unless ML goes bust which the RM said it will not happen as they are a very big and long standing investment company. So he said “no worry” That is how I invested a great amount in the J8.
I checked with Citibank and confirmed the frst interest was credited to my account. I am still very confused whether to hold on or to redeem early and suffer a loss of about 13.5%.
Can you share whether I should hold on (for another 27 months) and is quite worrying on unseen financial situation.
Reply
Hi Firstimer,
I just want to check with you if you got your interest paid fully i.e. 3.15% as stated in the brochure “Fixed coupons of 3.15%pa”? I am asking because i got alot less. I am abit confused if they have right to do so or I am the only one.
the 3.15% pa is split into 4 quarter ie every quarter,the interest rate is 3.15 / 4= 0.79% of the principal amount. Eg if you invest in S$100K, the interest is 100K x 0.79% = S$790.00
This is what my RM told me. You try out this formula & check whether this equate to the amount you are getting.
Reply
I am in a dilamma on whether to keep the J8 or opt for buyback. Now that ML announced such a hugh loss, I am afraid that ML might default these notes.
Pls share your views.
ReplyFinally, I got in the mail … the 1st Qtr interest in J8! 🙂
Not sure if the bank credit this interest into my savings or continue to accrue & accumulate as sum of J8 investment by default. Got to check this out.
Obviously I will opt for the former cos I have lost all trust in confidence in any investment product sold by the banks.
Anyone has any idea where the interest is credited to???
ReplyHi WalkingDead,
It should be credited into your savings account.
It is for my case. You can check your saving account for the interest.
Hi Hopefu,
I managed to ge the infor on Jubilee 9.
http://www.citibank.com.sg/SGGCB/APPS/portal/loadPage.do?path=/promo/det/ml_series9.htm&tabId=Investments+And+Deposits
To all Jubilee 8 holders,
We live in constant worry that ML may default on these Notes and yet Citibank is promoting Jubilee 9. Banks do not care that we have sleepless nights; all they care about is making money for their banks. Citibank has earned 3.9 % out of the money i have invested. There is no risk for them, see. I have truly learned my lesson-no more sturctured products for me.
Does anyone know what is the latest redemption price for Jubilee 8? My RM emailed last week that it is 86.5%.
All the best and I truly hope things end well for us.
Hi Amy,
Thank for the info on Jubilee 9. I did not buy Jubilee 9 and I doubt anyone would have but I remember seeing the advertisement on ST and it mentioned Temasek Financial (I) Limited.
In overview (point 3), Temasek Financial (I) Limited is being mentioned.
It looks like Temasek is in approval of this structured deposit and its brand name is used in this marketing. Temasek Holdings (Pte) Ltd is an investment holding company owned by Singapore’s Ministry of Finance. So MAS is also in approval of this structured deposit.
IntheKnow,
I hope you can intrepret this point and give us your opinion. Again, that few sentences already are quite challenging for me to understand. Thanks again.
Quote
3 Potential to receive a Bonus Coupon of 0.10 per cent. of the Denomination for the Notes payable, on the Bonus Coupon Payment Date if (i) the interest amount payable in respect of the Observation Period from 21 September 2010 to 20 March 2011 on the 4.50 per cent. Guaranteed Notes Due 2015 issued by Temasek Financial (I) Limited, unconditionally and irrevocably guaranteed by Temasek Holdings (Private) Limited (ISIN Code: USY8585EAA65) (the “Reference Asset”) is paid in full or (ii) the Reference Asset is redeemed by Temasek Financial (I) Limited prior to 21 March 2011, and assuming no early redemption of the Notes. The guarantee by Temasek Holdings (Private) Limited is an unsecured and unsubordinated obligation of the guarantor*. Temasek Holdings (Pte) Ltd is an investment holding company owned by Singapore’s Ministry of Finance. The Company’s investments range from corporations to government-owned operations*. As at 1 August 2008, Temasek Ho ldings (Private) Limited indirectly held approximately 9.9% of the share capital in Merrill Lynch & Co., Inc. Temasek Holdings (Private) Limited has committed to purchase additional shares of common stock of Merrill Lynch & Co., Inc. but it will not make any purchase of such shares that would give it a greater than 9.9% interest in the share capital of Merrill Lynch & Co., Inc. unless and until it obtains of regulatory approvals to do so*.
*
Neither Temasek Financial (I) Limited nor Temasek Holdings (Private) Limited has consented to the inclusion of such information in this document. Please refer to Appendix 2 of the Pricing Statement for more information.
Hi Lion Investor,
I bought the Jubilee 3 and as you know it burst and I got zero return. I bought it thinking it was safe because the brochure has a headline saying “Sound Investment”. above a list of 5 RE, which are Lehman, Macquarie Bank, Morgan Stanely, OCBC and UOB.
I bought it through mail and talking over the phone with the business development executive which I cannot recall his name no matter how hard I tried and end up with a headache. He said it was safe but I have no evidence to prove that because it was about 2 years ago. On hindsight, I realsized how stupid I was, even though I am an educated person. Although I invest in stocks, it’s always a few K for each buy, never so big an amount in one go. Most of my stocks are in REITS, shipping trusts or diversified funds that give an above market rate return. I don’t get into speculative stocks. I trust the FI because I had been with them for a long long time. Is there a case for “Breach of Trust”?
No one ever explain to be the complex mechanism underneath and frankly until today I stil don’t really understand. I was never told the risks involved as well. I intend to pursue this matter but I’m educated though (reference MAS announcement last night). I will be seeing the FI next week. Do you think I have a case with “Breach of Trust” and “Misled”, which I really feel so?
Henry…
Reply
I have the same experience as you.
I call up last Friday and was told the buy back rate is now 85%.
ReplyHi, have found the many comments here very useful.
I’m also a investor in Jubilee 8 and have been appalled by the general lack of knowledge that my Citibank RM has displayed regarding this and similar structured products.
Unbeliveably, she forgot to call me on 9/10 Oct to update me on the redemption value despite my request a few days prior to 9/10 Oct. Also, she could not even confirm that redemption was on friday and had to check with her team to ascertain this! Of course, any other more technical questions were met with similar responses. I simply fail to understand why such RMs should be licensed to sell structured products to start with.
Just wondering if any one else has had a similar bad experience with their RMs at Citibank.
ReplySometimes, the problem of adverse selection come into play.
Ask yourselves, who are the PFCs you see in the banks selling the products?
Will they likely be fresh grads eager to make big/quick bucks? Or would they likely be experienced finance professionals? I believe more likely the former.
Do you think fresh grads possess the right skills and sufficient knowledge/experience to clearly explain or even understand the complex products themself? I suppose not.
Even myself, who have seen and encountered hundreds of structured products will take a while to digest a prospectus/termsheet of a product and I dare not profess I understand it 100% all the time.
Just remember, RMs are hired to SELL, not to EDUCATE.
Replyof course they are always good RMs out there..
i should not have used a bamboo to knock the whole boat.. sorry about that…
ReplyHi Annoyed,
I agreed with you. I also had the same experience like you when I tried to contact my RM at citibank.
Also, when she recommended the Jubilee Series 8 notes to me, she told me there’s no risk involved and it’s liked a fixed deposit and didn’t even explained to me about the product.
After i realised that merrill lynch has been brought over by boa and the recent market situation, I tried to contact her but she doesn’t even return my call and worse still, I had to go down to the branch to personally ask for the buyback rate.
Fortunately, there’s a RM there who explained the notes to me thorougly again when I went down recently.
Well, I guessed I will still be holding on to the notes for the time being and have to monitor closely to the situation.
Please share you views.
Thanks.
ReplyHi, intheknow,
thank you for you insight in jubilee series 8. I am also holding DBS high Note 2. DBS told us that they May early redeem the notes if the fund is insufficient to secure the obligation of Constellation, a investment vehicle of DBS, due to the credit events in the Reference Notes (CDOs of 100 companies). However, I do not think they can take such optional actions for their own benefit while sacrifcing us investors, as it is not clearly stated in the pricing statement (the early redepmtion terms mentioned are credit events in the reference entities). Do you think my argument make sense? please advice.
the pricing statement of HN2 can be download from
http://www.4shared.com/file/63984958/421d5bc9/high_notes_2_pricing_statement1.html?
DBS High Note 2 has the same structure as Lehman Mini-bonds.
For both these products, there are reference entities as well as a basket of underlying securities.
1. If any of the reference entities default, the whole structure will early redeem and the investor will suffer a loss in principal.
2. If more than 8 (approximate) of the underlying securities in the basket default, the whole structure will early redeem and the investor will suffer a loss in principal.
The good news for DBS High Note 2 is neither Lehman, Freddie, or Fannie are the reference entities, so there is no early redemption under my point 1.
However, Lehman, Freddie, and Fannie belong to the basket to underlying securities. Once the loss amount in the basket exceeds a certain threshold, the whole structure will early redeem and the investor will suffer a loss in principal. This is what DBS is trying to say when they make statements like “fund is insufficient to secure the obligations of Constellation”.
The figure of 8 underlying securities defaulting is only APPROXIMATE and the number can change depending on the recovery amount from each defaulting security in the basket.
PLEASE NOTE THAT NEITHER JUBILEE SERIES 8 or CITRINE NOTES HAVE THE ABOVE STRUCTURE. THE ABOVE STRUCTURE IS ONLY RELEVANT TO DBS HIGH NOTE 2 and LEHMAN MINI-BONDS.
Reply
Hi
I have placed an S$100k estate (from by husband) with DBS High Notes 2 two years ago. I am not a risk taker, and also with that sum of money that was left by my husband for my 2 kids, I really don’t know what to do with it except leave it with a reputable bank…thinking surely a very safe place
I am lost and don’t know what else to do, except praying that there’s a turn-around on the world financial crisis, and hoping that the money will be ‘well-protected’ until the maturity date.
The banker told me that should another 2 of the banks/financial institution that they have invested in, in relation to the DBS high notes 2, go bust…..the DBS high notes 2 will equal to $0. But after reading what you’ve said, it seems like my understanding from the banker is totally different from your statement.
Can you pls advise me what should I do next? To get out now? Cause the banker has called me and informed me to consider to get out now since many of her clients did the same 🙁
ReplyWhat your banker said about “should another 2 of the banks/financial institution that they have invested in, in relation to the DBS high notes 2, go bust…..the DBS high notes 2 will equal to $0” MAY be true. Why do you say your understanding from your banker is different? Are you referring to the number ‘2’?
As I mentioned in my point 2, If more than 8 (approximate) of the underlying securities default, the whole structure will early redeem and you will suffer a loss in principal.
Your banker has mentioned that if another 2 go bust (3 have already defaulted), you may suffer a loss in principal.
There is no magical number. If the first X number of defaults cause a loss above the threshold, the whole structure will early redeem and you will suffer a loss in your capital.
With regards to your question on whether you should get out, there is no right answer. I suspect if you get out now, you will already suffer a HUGE loss in your principal. Have you asked what is the latest buy-back price of your note? I suspect it will be 50% thereabouts or less since 3 underlying securities have defaulted already.
It’s up to you if you want to take the gamble. Sounds like a 50% 50% to me. Get out now and lose half. Or hold on to maturity and you may get back 100% or nothing.
Reply
Lost :
From today’s Lianhe Wanbao, I read that DBS agreed to do full refund to two High Notes investors go see them with sad storys.
Go pick up a copy and read, hope you are the third person.
All the Best.
ReplyLost,
yes, ask your banker to guide you a way to see the relevant person in DBS to get your money back, or simply tell your PM about your case.
For me,I complained with the senior manager in DBS, no response, although I didn’t understand more about the product than you:).
Replythanks a lot, intheknow.
But there is no statement regarding to your point 2 in the pricing statement. Are the pricing statements for all such products are ambiguous? or is HN2 a special case?
ReplyDBS High Notes 2 and the Lehman Minibonds all have this sort of structure.
1. Credit linked to X number of reference entities. ANY goes bust, you will suffer a loss in principle.
2. Proceeds from investors will be used to buy a basket of underlying securities. Up to Y number goes bust, you will suffer a loss in principle.
I don’t have the pricing statement for DBS High Notes 2 on hand. But the FAQ from DBS on High Notes 2 actually mentions this (the part about THE COLLATERAL PURCHASED BY CONSTELLATION, 100 NAMES FROM 17 INDUSTRIES AND 14 COUNTRIES):
—-QUOTE—-
As explained in the HN2 Pricing Statement, investors are subject to the following credit risks:
a) The credit risk of the Issuer;
b) The credit risk of Constellation and the collateral purchased by Constellation (‘collateral’) to secure its
obligations under the Reference Notes; and
c) The credit risk of the 8 Reference Entities in the first-to-default basket (FTD basket).
With reference to (b), investors were informed that Constellation would be using the funds raised in issuing the
Reference Notes to invest in high quality bonds or structured securities rated at least AA by S&P, AA by Fitch
or Aa by Moody’s (at time of the issue of HN2) to secure its obligations under the Reference Notes (collateral).
Investors were also informed that the specific composition of the collateral was yet to be determined at the
time of the Pricing Statement. The collateral, which comprises of 100 names from 17 industries and 14
countries, was rated AA by S&P at the time HN2 was issued.
Lehman Brothers Holdings Inc., Federal Home Loan Mortgage Corporation (Fannie Mae) and Federal Home
Loan Mortgage Corporation (Freddie Mac), are not Reference Entities in the FTD basket but are all entities
linked to the collateral. As a result of recent events surrounding these 3 entities, S&P has on 23 September
2008 downgraded the collateral from AA to BBB+. The downgrading will not result in an early redemption of
the Reference Notes and the current valuation of HN2 has already taken into account the events surrounding
these entities.
If HN2 is held to maturity, and there is no credit event in the FTD basket and the Reference Notes are not
redeemed early, investors will receive at maturity, the principal that they invested.
As the amount of principal and/or interest payable to investors in HN2 is dependent on payments received
from Constellation, if the collateral becomes insufficient to secure the obligations of Constellation under the
Reference Notes, the Reference Notes may be redeemed early. If this happens, HN2 would be redeemed
early as well and investors may get significantly lower than their investment.
—-UNQUOTE—
“As the amount of principal and/or interest payable to investors in HN2 is dependent on payments received
from Constellation, if the collateral becomes insufficient to secure the obligations of Constellation under the
Reference Notes, the Reference Notes may be redeemed early. If this happens, HN2 would be redeemed
early as well and investors may get significantly lower than their investment.”
This is the KILLER part..
In essence, what it is saying is if the pool of 100 securities have deteriorated to a level determined by DBS, the whole structure will be terminated and the note early redeemed AT A LOSS OF PRINCIPAL to the investor.
You see… how High Notes 2 and Lehman mini-bonds generate their income to pay the investors the 5 to 6% interest is like this. Of course, I am simplifying things:
a) they collect X amount of money, say USD100million.
b) they use the USD100million to buy a pool of securities
c) they SELL credit default swaps on the Reference Entities to willing buyers
‘b’ essentially is being used to ‘maintain’ your money and to pay you your principal back after 5-6 years.
‘c’ essentially is being used to pay investors the regular 5 to 6% interest
so if the pool of securities deteriorates significantly below USD100million (which is the 8 [approximate] defaults I mentioned), the Issuer of the note will ‘cut loss’ and liquidate whatever is left of the pool. This is because at this level, the issuer knows that they will never be able to pay you back 100% at maturity date.
and if the jackpot event ‘c’ happens, ho say liao… the buyer of the credit default swap will make a ‘claim’ on the Issuer. At that point in time, the issuer has to make a big payout to the party who bought the Credit Default Swap, and guess where the big payout is coming from? Of course, it’s going to be from the Pool of Securities and it will be liquidated.
Replyintheknow,
thanks for the reply for my complaint about HN2. as a matter of fact, in the DBS website FQAs about HN2, DBS has intentionally changed the words, for example,
(1) the original sentence HN2 is “designed for defensive investors seeking enhanced yield” has been changed to “designed for investors seeking enahnced yield…”
(2). for the risk factor b, the original sentence is “you are subject to the credit risks of Constellation that is collateralized by securities rated AA or better”, has been changed to “The credit risk of Constellation and the collateral purchased by Constellation (‘collateral’) to secure its
obligations under the Reference Notes”.
besides, we haven’t been notified of the 100 CDOs until recently after the three credit events.
so, shall we have a say?
ReplyHi Financeblind,
I am not sure about your last 2 paragraphs.
Do you mean?
a) we haven’t been informed by the bank until recently that 3 of the 100 securities have defaulted? If you meant this, the default of Fannie, Freddie, and Lehman only happened within the last 6 months, so I don’t see this as a possible argument area.
OR
b) you never knew that the 100 securities played a part in your High Note 2? i am pretty sure something in the thick prospectus of High Notes 2 (i haven’t read the prospectus myself), there will be some mention of the ‘Pool of 100 securities’ and how their defaults will affect the ‘Collateral’ required to secure Constellation’s obligations.
ReplyHi intheknow
Thanks for your explanations, and having read the paper on Sat and from the lists of response, guess what I can say is all this while my understanding from my banker about the HN2 was all a mistake.
I was actually investing on something know as Credit Rating (Credit Risks) and not simply ‘investing’ on the ‘chances’ of the entities going into bankruptcy. To me having an entity to go bankrupt is totally a different story of having an entity’s credit rating being downgraded. That was why I’ve mentioned that my understanding was difference.
Replyintheknow,
thanks for your patience and expertise. I think we are in urgent need of you and the like.
as a matter fact, the 100 securites was generally called Reference Notes in the HN2 pricing statement, but DBS had never told us until recently what it is and how it works. The reason they gave is that what security to hold had not determined at the moment the pricing statement was drafted.
the function of the Reference Notes is to “earn a high coupon”. the risk involved in the Reference note is very general, such as it will fluctuate with the market, the performance of the Notes is directly linked to the Reference Note, credit risk of COnstellation cited as (b) in my last post, no more details at all. There is no formula to tell us how it works. you can find the brief version which DBS applied to marketing (i.e., the one showed to uswhen we bought the product) from the following link:
http://www.4shared.com/file/63984958/421d5bc9/high_notes_2_pricing_statement1.html?
In the full pricing statement which DBS sent to us weeks after the transaction, there is a paragraph (Risk relating to COnstellation and the Reference Notes) as follows:
In addition, while the obligation of COnstellation under the Reference Notes are to be secured by the relevant Charged Assets and Swap aggrement, there can be no assurance that such Charged Assets or Swap Aggrement will be sufficient to secure any or all of the obligations of Constellation under the Reference Notes”.
that’s all, no specific details about how it will affect us investors.
ReplyHi Financeblind,
No worries. I am glad to be sharing my views.
Just to set the record straight, I am not working in DBS nor one of the retail banks/FIs who sold these products to the retail investors.
I do not hold Jubilee Series 3, DBS High Notes, nor any Lehman Mini-bonds.
My views comes from my experience handling structured products due to the nature of my job. I am NOT into sales.
Thus, I can say my views are neutral and not biased in any direction. Also, my views should not be considered as legal advice.
Back to your question.
1. DBS was not able to break down the 100 securities when High Notes 2 was sold is because they have yet to buy the 100 securities. Remember my simplified example whereby DBS uses your USD100 million to buy the securities? Since they have not collected all the monies from the investors, they have indeed not purchase the 100 securities and thus could not tell you what they are.
2. Look at Page 7 of your attachment. It is stated that “you are subject to the credit risk of Constellation which is collateralised by securities rated AA or better”. This is making reference to the 100 securities.
3. Look at Page 69 (labelled as Page 53) of your attachment. This portion tells you that the USD100 million received from the investors is going to be used to purchase a pool of assets rated AA and above.
4. There is no formula to determine how many of the 100 securities defaulting will cause the note to early redeem since it depends on the recovery rate on the defaulted securities as well as the loss threshold of Constellation before they decide ‘ok.. time to cut loss and early redeem’.
Reply
Hi Intheknow, many thanks for reviewing the termsheet and coming back so quickly with your feedback. Will continue to monitor the devt of the merger between ML and BOA. Thanks for availing your time!
Have a good weekend!
Hi LionInvestor, thanks again for facilitating this! You have a good weekend too!
ReplyHi PPL,
you are welcome.
Many thanks to Intheknow for helping out here with his time and knowledge.
ReplyAn update here.
1) Saw the first coupon payout in my bank account today.
2) ML posted a net loss of US$5.2billion for Q3 2008. Heard that this is their 5th consecutive lossing quater.
We have to constantly lookout for the news on the merger. Hopefully they(ML and BoA) would have successfully completed the merger by end of Q1 2009.
Reply
Hi Intheknow,
I had invested some ML Jubilee series 8 notes. Is adviceable to sell the notes now at a loss of 13% and put the sum into some STI index shares ?
Reply
Dear all,
it’s been an excellent website here with so much varied contribution from both experts who are willing to share their knowledge, people like me who are amatures.
Just to inform all that I received a letter informing about the interest that has been credited into my account and it works out to be about 3.17%.
ReplyHi Intheknow,
Thanks for “unpacking” the finer points of these structured products so clearly.
Can you please shed some light on the “Merrill lynch SGD 3-Year Principal Protected Fixed Income Notes” product. Is this product the same as the MLJ8 and the Citrine Golden Cushion? I have just received the first dividened payment from this ML Fixed Income Notes. This is good thing, right? This means, there is no default on the part ML.
Would appreciate it if you can let me know your thoughts on this. Much thanks!
-ppl
ReplyHi PPL,
Would you be able to give me the link to the prospectus/termsheet so I can examine the product before advising further?
ML has issued many structured products and as you can see, they can vary from potentially explosive credit default swap products to very safe ‘fixed deposit’ like products.
You are right. Receiving dividend payments indicate that everything is fine with the product.
If you do not receive dividend payments, it constitutes an event of default (unless the prospectus specifically caters for deferrment of dividend payments).
ReplyHi Intheknow,
Thanks for your speedy reply! Unfortunately, there is no link to the termsheet but I do have it in PDF format. Hmmm…is there any way I can attach here for you. Can’t seem to figure out how though.
Is there a way I can send the document to you? Thanks.
-ppl
ReplyI have looked through the termsheet and these are my conclusions:
1. The 3 year ML note is as safe as Jubilee Series 8 and Citrine.
2. The 3 year note can only be early redeemed if there is a bad event, which is ML defaulting.
3. If no bad event occurs, the note will be redeemed at 100% after 3 years.
4. This is like a 3 year fixed deposit paying 3% p.a. (quarterly payout) with a possible 0.1% bonus coupon if the underlying basket moves up 30%.
5. You are taking on the credit risk of ML (in future BOA).
ReplyHi Intheknow,
Thanks a lot for your reply. I think your explanation on why the buy-back rate differs does make some sense.
I just wonder (and I believe many other people do as well) — how is this buy-back rate determined?
My RM told me that it is not determined by market (i.e., demand and supply). Rather, it is set by Merill Lynch and it is the price that ML is willing to buy the notes back.
Then it comes to the natural question — why wouldn’t Merrill Lynch just set the back-back price as low as possible (i.e. 0%)?
ReplyML, being a reputable financial firm, has to provide FAIR buy-back prices on a regular basis (weekly where possible, monthly on a minimum).
You are right, they could set the buy-back price at 10%, but who would sell back to them at that price?
All issuers of structured products have to provide buy-back prices. Of course these buy-back prices can vary rapidly depending on market conditions, but they are usually a ‘fair’ price (after factoring in cost of unwinding and commisions.. etc..)
ReplyHi,
Thanks everyone for sharing their experience. I am also holding the jubilee 8 notes and did not know what I got into when I bought them. My RM told me the Merrill Lynch buy-back price is 87%, which is fairly low.
Is there anyone holding the Merril Lynch Citrine Golden Cushion notes? I have a larger amount there, and could not get much information on that. It seems that those notes were not sold to many people. I just want to know whether I should sell those. The buy-back price now is only 78%.
Anyone can share any information/experience on the Golden Cushion notes — I would greatly appreciate….
ReplyHi Confused.
Not to worry.
Citrine and Jubilee Series 8 are very similar in structure. All my earlier comments on Jubilee Series 8 and why it will be safer after BOA takes over ML continue to apply.
The only difference is the final interest payment on Citrine is not guaranteed. You could get 0% interest for the final interest period if the cushion amount is exhausted.
The 9% lower buyback price for Citrine compared to Jubilee Series 8 is because it’s widely expected that the cushion amount will be exhausted and that the investor will get 0% interest for the final interest period. Citrine is therefore a ‘lousier’ product compared to Jubilee Series 8 and hence has a lower buy-back price. However, CITRINE IS AS SAFE AS JUBILEE SERIES 8. Both are based on the credit worthiness of ML and BOA (after the takeover).
All in all, no big deal. Jubilee Series 8 holders will get 7.875% total interest over 2.5 years while Citrine holders will most likely get 7% total interest over 2.5 years (i predict the cushion will be fully exhausted).
Reply
Hi InThKnow
any advise on the HSBC SGD Double No touch note on Financial Basket Notes.
I have some investment as well
thx
Is that some sort of Range Accrual product?
Please post link to prospectus and I will take a look at it for you.
anyway it sounds like it’s issued by HSBC with its interest components liked to some bank stocks.
I will be able to better advise only after checking out the prospectus.. but i think it sounds pretty safe as I suspect you will only lose your principal amount should HSBC go bust.
ReplyIt appears to be some form of Notes that provide “enhanced returns” if certain equity index or components of it stay within a certain range.
ReplyHi CKH,
Lioninvestor has emailed me the termsheet.
No problem. This is a principal protected structured product that is guaranteed by HSBC. So, you will only lose your principal if something bad happens to HSBC (e.g. HSBC defaults).
However, your interest amount is dependent on the performance of the 6 underlyings. ALL 6 underlyings have to have their market prices kept within 70% to 130% throughout the 1.5 years in order for you to earn 14%. If at any point in time, ANY of the 6 underlyings move out of that range, that’s it, the max interest payable would only be 8% as long as ALL 6 move back within the range on 24th December 2009. If ANY of the 6 underlyings move out of that range and STAY OUT as at 24th December 2009, you get 0% interest.
Based on current market prices, I believe the Lower Trigger event has occurred. Thus, the best case scenario would be for you to get back 100% of your principal + 8% in 1.5 years time. You can NEVER get 100% principal + 14% in 1.5 years time anymore.
The worst case scenario (other than HSBC defaulting) would be to get back 100% of your principal and 0% interest. This may be likely in my opinion, unfortunately.
As stated above, the worst case scenario would take place if ANY of the 6 underlyings remain more than 30% below their market price stated on Page 12 of your termsheet on the Valuation Date of 24th December 2009.
Merrill Lynch and Morgan Stanley are currently down more than 50% from your ‘start price’. (You may want to argue a typo error as they spelt ‘Merill Lynch’.. joking..)
Cheers,
Intheknow
What kind of justice can be done for sales misinterpretation for Jubilee Series 8? Do we join the Jubilee ‘protest’ group as indicated in your front page?
Can we demand early redemption at 100%?
I know all this sound ridiculous but i just want to know my options at this point of time other than waiting.
ReplyJubilee Series 8 is very similar to a fixed deposit except you are ranked as a Senior Unsecured creditor rather than Depositor. You are mainly taking on the risk of the ISSUER.
Jubilee Series 8 cannot be compared to the Lehman-linked notes which are complex derivative instruments with mainly Credit Default Swaps imbedded.
Not all structured products are like the Lehman-linked notes.
In essence, understand the structured product.
ReplyHi Intheknow,
Thank you for your valuable information.
I have also bought Jubilee 8 and the amount is quite substantial to me. Over the last 2 weeks, it was indeed hellish for myself and jubilee 8 investors. However, there is definitely some comfort…
Below are my personal opinions and findings…
1. BOA seems determined to acquire ML. BOA and ML directors all approved the deal. I believe BOA directors are major shareholders of the company. As such, when they approved the deal, it can be quite certain that the deal will go through.
2. Barclays Global Investors is BOA largest shareholder (3.97%)
Temasek is ML largest shareholder (14 %). Temasek is also a substantial shareholder in Barclays. If ML fails, Temasek will stand to loss US$5-6 B. I am sure Temasek will do whatever it can to ensure ML stay afloat or complete the deal. That will mean to influence Barclays (as shareholder of BOA) to accept the deal.
3. CEO of BOA seems to be so certain about the deal that he has already assigned a post for CEO ML. BOA also raised U$10 B successfully last week in preparation for the acquisition. One may note that it is not Temasek that invest the US$10 B. Another Investor did…It demonstrated confident in BOA and its upcoming acquistion despite the turmoil.
4. If there is any sign that the deal may fall, US government will definitely intervene (look at Morgan stanley and Japan bank). Also, Will Temasek do nothing at all?? When BOA is selling shares to raise 10 B last week, it is particularly noted that Temasek is aware of the shares sale.
5. As of today (14 Sept), US$25 B is pumped into BOA and ML combined! This is another endorsement by the US government that the deal will be done. BOA got more money and the US government becomes a major shareholder in BOA. That means more say!!! US government will definitely want the deal to be done!
Lastly, once the deal is completed, I believe that BOA will assume all responsibilities (debt / asset) of ML (including Jubilee 8). That means that unless BOA goes bankrupt, Jubilee 8 should be safe. Will BOA goes bankrupt in the next 3 years??? My personal opinion is if BOA can go bankrupt then the whole world will probably have only less than 10 banks left. Most people on Earth will probably lose lot of personal wealth irregardless where you put your money.
Another thing…
This is the third time I bought into Jubilee notes. (Sadly, only until recently I know what I am buying). The last two jubilee notes were redempt early. The first notes was redempt after 2 quarters. The second notes was redempt after 1 quarter (Feb 2008). As such, there maybe early redempted on Jubilee 8. Why?
1. ML needs money. US FED offers lending (almost unlimited) at much lower rate than 3.15%. AIG just borrowed another US$38 B form FED last week. So why would ML want to pay 3.15% interest when it can borrow from FED at 1.5%? If recession sets in, the rates will goes lower…
2. There is also complication with the contract (jubilee 8). The issuer is ML. If it is changed to BOA, then creditworthiness of BOA becomes an issue for the notes. As an investor of jubilee 8, I did not sign to the creditworthiness of BOA. So that will make the entire contract void.
Having said all these points, I want to stress again these are all my personal opinions and findings. As much as I hope that I am correct, I can be entirely wrong . I just hope whatever decision that we all have to make, it must be made after knowing most if not all available information.
I am hanging on to the notes.
Please comment or advice on any points I have made.
Hopeful
ReplyHi Hopeful,
When you mentioned that your notes were redempt early, did you manage to get back your principal?
Thanks.
ReplyHi Hopeful,
You mentioned that the past 2 series notes were redempt early…May I know what happens when it’s being redempt early?Would you be able to get back the principal?
Thanks.
ReplyHi Alexis,
When the notes is being redempted early, you get back Full principal plus the interest.
Thanks.
ReplyHi Hopeful,
Your comments and findings reflect the conclusions of a person who is willing to put in the effort to research more on BOA and ML. Good effort!
Could you elaborate more on the early redemptions on the past 2 series of Jubilee notes?
Were they situations whereby ML was contractually bound to early redeem the Jubilee notes at 100% based on market movement?
I know of structured products whereby they promise early redemption at 100% should Underlying A, B, and C move about X% on any valuation date.
If so, the early redemption of the 2 previous Jubilee Series is not a good indicator for Jubilee Series 8.
Jubilee Series 8 does not allow for the early redemption by ML UNLESS a ‘BAD’ event such as default has happened. From my understanding, ML has no right to early redeem the 3.15% notes just because it is able to have access to cheaper funding. This would be known as an Issuer Call Option and there isn’t one built into Jubilee Series 8.
So in summary, what I am trying to say for Jubilee Series 8:
1. Early redemption can only take place should a ‘bad’ event occur. If it does happen, it is likely that you will not get back 100% of your principal. ‘Bad’ events would be mainly ML or BOA defaulting or Cayman Islands starts imposing taxes.
2. ML or BOA cannot early redeem the notes at their discretion if no ‘bad’ event has occurred. Reasons such as a cheaper funding cost from Fed or other sources will NOT allow ML or BOA to early redeem their notes even if they are willing to pay 100%.
ReplyHi Intheknow,
As for the early redemption of the notes, I believe ML has the right to do so for whatever reason. This is specified in the prospectus.
In the prospectus on page 4,
Redemption due to taxation and other reasons:
In the event of:
(a) an Event of default under the notes
(b) the securities being repaid early for any reason for example because there is a an event of default under the securities or for tax reasons.
(c) the Swap Agreement being terminated early or
(d)the Caymens island imposing tax on the issuer or on payment under the notes which the issuer is unable to avoid.
Look at event (b). That means ML can redempt the notes earlier for whatever reason.
I have looked through Jubilee 8 prospectus again and I do not see
” Underlying A, B, and C move about X% on any valuation date.”
It is the same for Jubilee 8 and the two previous jubilee notes. I can testified that the two previous jubilee notes were redempted earlier. I have the Redemption letter from Standard Chartered Bank and I received the full principal plus interest on the last 2 jubilee notes. No doubt about that as it is a fact.
You may also note that there is No investors with Jubilee 6 or Jubilee 7 in the market now. It has been redempt earlier.
Back to Jubilee 8, will it be redempted earlier? This is my hope as well as everyone else. I am not trying to convince everyone here to hold on to Jubilee 8. You must make your own decision.
Another thing…
I realize that in the second week of Sept (between 8/9/2008 -12/9/2008), Strait times had advertisements on Jubilee 9. Then when Lehman collapsed on 15/9/2008, there is no more advertisement on Jubilee 9. I suspect that Jubilee 9 is terminated because of the saga that follows. If anyone has a prospectus on Jubilee 9, please share. It will be good to know any difference between Jubilee 8 and Jubilee 9.
Thanks
ReplyHi Hopeful,
Thank you for sharing some facts and opinions. I am hopeful that things will get better.
About the early redemption of the 2 series Notes you mentioned, did you manage to recoup some of your principal? Is the loss very substantial?
Despite the 2 redemptions, you still purchased Jubilee 8 Series. Very courageous of you.
I myself bought these Notes at the recommendation of my RM. She assures that as long as I hold on to them for 2.5 years , I should be alright.
ReplyI took a look at Jubilee Series 5 and this product has an Issuer Call Option built in. Page 4 of the prospectus states that ML at its discretion can early redeem the notes at 100% + interest accrued.
I still maintain my view that Jubilee Series 8 does not have an Issuer Call Option built in. ML can only early redeem the note when a ‘bad’ event has occurred.
Referring to the cut and paste done by Hopeful, the securities (unsecured bonds issued by ML) will only be repaid early when there is an event of default.
For example, you buy a government bond. The government cannot choose to early repay you your money UNLESS they are in default or there is an Issuer Call Option built in.
ReplyHi Intheknow,
The 2 jubilee that I bought earlier is called Jubilee Retail Secured Note Programme (Nov 2006) and Jubilee Step-up Fixed Rate Notes (Mar 2007). Both of the notes have a Issuer’s Call Option.
In Jubilee 8, there is no issuer’s call option. Obviously, this is a different situation as compared to the previous two notes.
Intheknow, really appreciate that you point this out.
So can I say that…
If there is an early redemption, there definitely will be loss of money?
If there is no early redemption and I hold until maturity (2.5 years later), I can get back full principal plus interest.
Please advice.
Thanks
Hi Amy,
For the 2 early redemptions, I get back full principal plus interest. There is no loss. ML redempt the notes. That is why I continue to buy Jubilee 8.
ReplyYes Hopeful.
1. if there is an early redemption, it will be because of a ‘bad’ event and you will most likely get back less than 100% of your principal.
2. if there is no ‘bad’ event, ML will continue paying you the promised interest and you will get back 100% of your principal on maturity date.
ReplyHi All,
I am in the banking and finance sector. I have much experience in the structured products business.
Contrary to what most people think, structured products are not ALL evil. As long as you know what you are going into and you FULLY UNDERSTAND the risk, there is no issue.
In a bull market, structured products have enabled both investors and investment banks to make big money, and no one complains. However, in current turbulent times, it is just unfortunate that the unlikely tail event has occurred and caused holders of structured products such as Jubilee Series 3 to lose their principal.
Anyway, back to the point.
BEFORE BOA TAKES OVER ML, the note can be early redeemed at a potential loss to the investor if:
1. ML defaults
2. Cayman Islands starts taxing the currently tax-exempt issuing entity.
AFTER BOA TAKES OVER ML, the note can be early redeemed at a potential loss to the investor if:
1. ML defaults (but BOA will take over all assets and liabilities of ML, hence BOA is like a second guarantor)
2. Cayman Islands starts taxing the currently tax-exempt issuing entity.
Thus, my conclusion is the note is now SAFER after the takeover of ML by BOA. The takeover, if it completes successfully, is BETTER for holders of Jubilee Series 8.
Do note that ML did not fail. It was sold at ‘full price’ to BOA.
Of course, I must also add a disclaimer that I cannot predict how the market crisis will evolve and if the worst is over. I am only trying to make a point that Jubilee Series 8 is totally different from the Lehman-linked notes.
There is of course still the possibility of both BOA and ML going bust anytime, as with all companies. So, if you are not prepared for this possibility, you should cash out your notes at a loss now.
Just remember, there is never a product with no risk. Even pure fixed deposits held with banks in Singapore are only guaranteed for up to SGD20k. Anything above that may be lost should the bank go bust as well.
Reply
I have by the assigned RM’s words, recently invested quite a
substantial sum & all I’m hoping is 100% capital sum plus early
notes termination too … instead of playing Russian Roulette.
Reply
Dear Intheknow
Tks for the advice.
It certainly will console us further or calm our souls if you can reveal your profile. Are you from one those distributor Banks, Merrill Lynch, BOA or MAS?
Even if BOA takes over ML, there are still other underlying conditions for early redemption of which payout will be at lower value. Correct me if I’m wrong.
ReplyDear Lion Investor
On hindsight, this is as good as a financial scam. Investors like us end up like suckers. As you highlighted in you publication above:
“The Notes are principal protected if held until the Maturity Date. However, redemption of the Notes at 100 percnt of the principal amount of the Notes is not guaranteed if the Note is disposed of prior to maturity, or the Note is redeemed early due to taxation or other reasons.”
We have no control on early Note redemption by issuer for whatsoever ‘other reasons’ and thus likely face significant loss of capital in such event.
After viewing Mr Tan at YouTube at Hong Lim roundup speech, it sets me thinking hard. Can’t we then unite & proactively write to MAS to seek protection or assurance to ensure such actions are justified, instead of waiting for the worse to happen?
Most of us I believe are snooped by the Bank on misrepresenting this structured product as no-risk. I certainly do not want to end like those High Notes or Mini-bond ‘victims”!
ReplyThose holding on to Jubilee Series 8….
PLEASE DO NOT PANIC.
Jubilee Series 8 is TOTALLY different from Jubilee Series 3, Lehman Minibonds, or DBS High Notes 5.
Jubilee Series 8 is akin to you placing a fixed deposit (except technically you are considered as a senior unsecured creditor rather than depositor) with Merrill Lynch. It is totally not linked to the share price of Merrill Lynch.
You will only suffer a loss in principal for Jubilee Series 8 if Merrill Lynch goes bust.
Since Merrill Lynch is going to be taken over by Bank of America which will take over all assets and liabilities of Merrill Lynch, Jubilee Series 8 is actually SAFER now than before.
PLEASE DO NOT PANIC AND EARLY REDEEM YOUR JUBILEE SERIES 8 AT A LOSS.
TOTALLY NOT A WISE MOVE.
ReplyHi InThe Know,
Thank you for your infor. It helps and I will wait and not redeem my Notes until the value increases.
Hi Lion Investor,
Is it advisable to redeem the Jubilee 8 notes now?
based on the current situation,what is the chances of getting the capital back at the maturity?
Thanks
ReplyThings appear to be brighter with the efforts of the gov.
But things are moving very fast, so you will have to keep up with the proceedings.
Reply
How do we find out what Jubilee Series 8 Notes are invested in? Does protection means unless Merrill Lynch goes burst we will get the money back? Doesn’t Merrill Lynch website gives info of the Notes detail?
ReplyThey are invested in securities issued by ML.
As long as ML doesn’t go bust or the notes are not redeemed early (whether by you or by the issuer), you should be fine.
Reply
when its redeemed early by the issuer, what will determine the price?
ReplyI applaud this website for its very informative content!
Since the start of financial turmoil … there have been lots of noise. Those impacted didn’t know who to talk to, what to do, where to get info … many were like lost in sahara desert, left high & dry!!!
Yes, let’s do whatever possible, hold each other hands while riding thru this roller coaster … hopefully it will be all smiles at end of the journey. 🙂
Do keep everyone posted on hearing even the slightest pin-drop. Am sure, somehow it may makes ones day or save a life?!
LionInvestor … KEEP IT UP!
ReplyHi,
Yes, I guess we are taking a gamble now and we have to play by ear. Situation seems to look alright now. I guess we just have to wait. I have been advised by my RM that they will advise us to sell away the notes if they think there should be a need.
She mentioned that BOA will defiinitely save Merrill Lynch now that they have bought over them if anything happens.
Anyone can advise and share your views…
Thanks.
ReplyTo all Jubilee 8 investors
If this can temporarily ease your mind & gives you few hours of blissful sleep, you may ask from your RM an official letter from the President of Pacific Rim – Merrill Lynch which is issued to the Banks.
The acquisition deal of ML by BOA is expected to complete by 1st Quarter 2009 or earlier.
For now … let’s keep our fingers, toes & legs crossed. Pray that all will go well!
I have invested quite a substantial sum & all I’m hoping is 100% capital sum plus early notes termination … instead of playing Russian Roulette with us.
ReplyWe are already in a technical recession.
Can anyone share some light if I should redeem my Jubilee Series 8 given the current situation?
Im really lost now having invested quite a big sum and fearing it becoming like another Jubilee series 3.
PLs kindly advise Thanks
ReplyThe main risk to holders of Jubilee 8 is that of Merrill Lynch going bankrupt.
If you think they will fail before the notes mature, then you should get out of the notes.
Reply
hi, i have bought the jubilee series note 8 and i m anxiously required to know the fate of the products. can someone updates me.
thanks
Reply
As a retiree, wonder how my 100k in minibond 9series is worth now?
Aiyah I’m gabbarah
Reply
HI Guys,
I also invested a substantial amount of my parent’s savings into ML’s Jubilee Series 8 bonds, my RM in Citibank also said the same thing, that BOA buying over ML is a good thing. So the most impt thing is, should i redeem it now? Or ? I am abit confused. As long as ML do not file for Chapter 11 or bankrupt, we should be safe am i right to say that?
Thank You
ReplyHi,
I just checked with my RM. She told me that it’s not adviseable to redeem the ML Jubilee Series 8 notes now. She mentioned that it’s indeed a good news that BOA bought over ML as ML’s credit rating has increased. She mentioned that with the current situation, there is not a need to sell the notes. She also mentioned that the longer we hold on to the notes, the higher the value it will be even we were to redempt it even before the maturity. Anyone can advise and share your views on this.
Thanks.
ReplyDear LionInvestor
Thanks for the great advises from your websites!
Is has been great to hear lots of views from fellow investors.
I am still staying put here with my MLJ8 notes, nobody really know what will happens in the future.
I fully agreed that there is no right or wrong here. Whether to redeem or not it’s all a personal risk preferences.
I think for those who have redeemed, you are definitely blessed with many good night sleeps and peace of mind.
For those who still have the stakes in the MLJ8 notes please do keep constant updates and contacts within this great website!
Hope that we will see the light at the end of the tunnel!
All the best to everyone!
ReplyHi,
Yes, I agree with lowbang. Let’s keep contant updates within this great website! I guess I will be still be keeping my Jubilee Series 8 notes for the time being and play by ear. I guess the upcoming months will be very crucial. We have to really monitor closely.
Cheers 🙂
ReplyHere an official note from President of Pacific Rim – Merrill Lynch. (Sorry I couldnt attach the doc from here) Enjoy the sunshine …
Dear Sir/Madam
By now you have heard that on September 15, 2008, Merrill Lynch and Bank of America
announced the acquisition of Merrill Lynch by Bank of America. Upon closing, this deal will create
one of the world’s largest and most diversified financial services firms.
We believe the combination of our firm with Bank of America will significantly benefit you as a
client.
The deal is scheduled to close in the first quarter of 2009 or earlier subject to shareholder
approval, customary closing conditions and regulatory approvals.
For our clients:
Hi,
Regarding the redemption of Jubilee 8 , how do I find out the bid offer? Do I email my RM ? If I want to redeem my notes, must it be done at a specific time? like before 3.00 p.m.?
Please help?
ReplyHi Desperate,
For redemption, you can get the prices through your RM (who will get it from Merrill Lynch).
Reply
Hi,
Something interesting on product risk mismatch with investor.
“ANZ bank has paid out more than $200,000 to an elderly woman whose life savings are tied up in a credit crunch-affected ING fund.”
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10535307
Reply
Phew! My mum and I have just redeemed our ML Jubilee 8! It’s a loss of 13% which is quite substantial for an elderly with no further income.
However, it’s the price to pay to sleep in peace. With all the bad news from everywhere and especially from the US – see the state of DOW Jones – there is no peace of mind.
Even if BoA and ML are safe, the redemption price may drop further later.
It’s a gamble and there is no right or wrong answer.
Just sharing my rationale for redemption with all my fellow Jubilee 8 “sufferers”
Now I can concentrate on Minibonds Series 2 process.
Reply
Bad Dream,
At least you have confirmed your loss was 13%. My loss in minibond series 2 is unknown!
Hi Jasmin
I also have Minibond Series 2 and my mum has a hugh life saving in it.
Let’s work together to seek justice and get our money back. C u at Hong Lim.
ReplyBad Dream,
Have you send your letter to Maybank? I managed to get it out and faxed to Maybank Tower.
My mum and I bought from ABN. After the Jubilee redemption, today, I sent out 6 registered letters from myself and my mum regarding being misled into buying minibond 2.
I followed Lioninvestor and Mr Tan’s procedure.
Letter to CEO of ABN
Copy of letter to MAS (Mr Goh Chok Tong)
Copy of letter to Fidrec
We will also be bringing our copies of our letters our MPs
Reply
I too redeem today. Might also lose interest that was declared on 9 Oct, payable on 16 Oct. Not fair as redemption may take 2-3 wks.
Reply
do bear in mind that this is altogether different product from minibonds and other 1st to default credit linked notes. This is a much more sensible product in the sense that you are making a small bet (the 20bps bonus coupon) on whether S$ interest rate will not fall out of a given range.
Whether to redeem now or later is a difficult one. The big question here is whether ML will indeed be taken over by BoA. I would say both of these institutions are considered by the Fed as “too big to failed”. The guy running ML now is an extremely clever and ambitious man. He is after the top job as CEO of the combined entity. My view is that he will pull all the strings to make it happen. There are 2 more encouraging signs 1) BoA owns a stake in China Construction Bank. They could make a profit of 7bn if they sell; 2) The Fed 700bn rescue package will come into effect pretty soon.
The Euro medium term note – in layman terms, a piece of paper says “I owe you” issued by ML. I don’t believe you are directly exposed to CDOs here.
I would however still urge you to join your brothers and sisters in Hong Lim tomorrow.
ReplyHi Del Boy,
Are you able to check what the underlying securities are? Or is it like what you said just an IOU from ML?
Replyno isin number. cannot do a check on bloomberg. I would say this is a “IOU”. p20-p21 explains very well.
ReplyThanks.
Del Boy,
I sent you an email yesterday. Did you receive it?
Reply
I was told by standard chartered bank that the price will be out today.
Let’s keep each other updated about the redeem price.
Reply
is there anyone out there who can shed some light on how was the daily prices determined? is it similar to share prices on supply and demand? what factors drive the prices up and what drive the prices down?
anyone?
HI Lynda,
The price is given by ML. There’s no secondary market for it and it’s the price they are willing to pay to buy it back from you.
ReplyI am one of the MLJB 8 investor via RBS_ABN AMRO, my RM advise me that the indicative bid price for 87% ro be redeem before 3pm on 10th Oct.
Reply
my RM told me lots of his clients are holding on to the Jubilee Notes series 8. Most of them still believe in the fundamentals of ML, and do not think it’ll go down under. Let’s see if there are any more surprises tonight…
ReplyWhat do you mean by “fundamentals of ML”? I thought ML has been sold to BoA? So now its a question of what will BoA do, or am I wrong?
ReplyMy mum and I were already burnt by Minibond Series 2. We thought we could redeem our Jubilee 8 today but was told we would lose about 13 %.
That is quite a big amount and my mum is so distraught again because if she loses this money she has nothing left as most of her savings was in Minibond 2.
I am not sure how to advise her. To redeem or just wait a bit longer and see how.
Am so distraught myself. Meant to send my letter of complaint to bank after redemption for fear of bad service. Now I don’t know what to do because I cannot leave the letter of complaint too late as well for minibonds.
Any advice would be greatly appreciated.
ReplySo it means it is not principal protected but depending on the value of the notes upon maturity, right?
Really bad dreams. On the bright side, losing 13% is better than losing 100% like me. My Series 3 still have to wait till 02 Dec and plus another 15 days before HSBC goes through the WaYoung.
Today’s Business times report HK govt investigating 9 banks for mis-selling.
See you at Hong Lim Square on Saturday. My heart is numb now. Better continue to find ways to recoup my lost then comparing the two govt actions…..
ReplyI was just told that the redemption price for this note is 0.87. Just in case anyone out there wants to know…now the question is, will BOA still continue with their decision to take over ML when the official announcement is made Jan 09, esp given the current turbulent mkt?
ReplyI believe BOA will take over ML as Temasak is a major share holder of both.
ReplyDear Lioninvestor,
I invested my lifesavings in ML Jubilee Series 8. Could you tell me if BoA ‘s purchase of MR means I can hold on to these Notes because my RM told me that the Shareholders may or may not agree to this. And, this buyback price I read about, how often can I email my RM to find out the Indicative Value? Right now , it is out 80.5% or is it more now? I am not very good at investment . I bought the Notes at the recommendation of my RM.
Could anyone help?
ReplyHi Ali Amenah,
The main risk in this product that will affect your return of principal is that of Merrill Lynch going under. It is certainly hard to say whether this or not will happen. The US government has come up with a few measures to support the banks.
There should be an indicative price at least weekly.
Reply
actually my question is how do we decide whether we should redeem it. ML is already bought over by BoA but are the chances now still high that BoA will default on this Note? Sigh, this is so complicated.
ReplyHi dilemma,
I received news from my RM at Citibank that the value of the Notes has risen to 86.5% and the redemption price is the same. She also told me the risk of Merril Lynch going bankrupt and that means , these Notes have no value. I am waiting for things to get better and then I will redeem these Notes. I hope this helps.
At my end , I live in constant worry because I invested a great deal.
Amenah
Reply
Dear lion invester,
I’m a layman on the street with little knowledge about investment. Unfortunately, i bought the Jubilee series 8 when i went to a bank to put in fixed deposit.
After what happened to Merrill Lynch, I search the web for more infor and found your article on the subject. The truth is i’m being told by the bank that this is a high yield and low risk instrument.
Anyway, i’ve checked with the bank today, they says the unwind percentage is 15%. I’ve put in quite an amount of money. If i choose to withdraw, i’ll lose quite a fair bit.
Base on the current situation, can you please advice what is the wise move?
Thank you very much.
ReplyLilian,
as I mentioned in a few other comments, the main risk you face is that of Merrill Lynch going bust before your notes mature.
Can you live with that risk?
It might also be possible to do a partial sale. Check with your distributor.
ReplyHi Lioninvestor,
Am i right to say that base on the current scenario, looks like ML is in a better position than before acquisition by BoA. Does the fact that Temasak putting in more $$ and BoA merger warrant the stability of ML? or rather, after what happened to Leman, the govn wouldnt risk to let any big financial institution to collapse again..? That is the BIG question, what’s your comments?
I spoke with my RM this morning, he says the unwind % will only be known on every friday. Prior to that (last week) he says he will be able to let me know the update everyday. Also should i decide to sell the notes any time of the week, i should base on that friday’s unwind percentage. So meaning if anything happen to ML on monday, i should wait 5 more days till friday to find out the bid price and sell. By then, isnt it too late for anything? Anyone bought this notes knows if this is the fact? would appreciate and some one bought JB note 8 help check with your RM, i’m in some doubt of what my RM says….
ReplyThe Friday pricing is quite a norm. At least that was how it worked with Minibond.
Note that the buyer of the Notes from you is ML itself, so if they do go bust, there isn’t any way for you to sell it back already.
With the US government pledging to buy stakes in the banks, things does look more positive than before.
Replyyes, what is the impact on the pricing of the notes when everyone redeems it.
Reply
Just got a indicative from SC on ML 8 notes. Today’s indicative is 85%. Thats bad! but of cos better than those that have bursted. they also say that coupon pyment are expected on 16th Oct.
Lion, this notes is entirely on the “existence” of ML, which seems ok for the time being becos there is a “white knight”(BOA). U think we do go unwind it? what will be the implication if everyone unwind? will it affect the note and eventually make it go burst?
Blur blur
ReplyNote the few interesting response to individuals on MLJS8
1) Response from a SCB RM to my query >>
“I have attached the letter on BoA – ML which states that Merrill Lynch’s capital and liquidity positions remain sound.
As for the redemption price of the Jubilee Notes Series 8, we do not have the pricing yet. I will keep you update once I have the pricing.”
2) SCB RM reply to Ksusi >>
“I have also been advised by RM in Standard Chartered to wait till the 9th of Oct.”
3) Citibank’s reply to Alexis’s >>
“I just went down to citibank to enquire about the buyback rate for the Jubilee Series 8 notes. It’s about 80% and this rate differs each day.”
Anyone got the gospel truth? Plssss share & update …
ReplyI think it could be due to the time difference when the responses were received.
They seem pretty consistent to me.
That pricing will only be available in the first week of Oct.
ReplyHi Lioninvestor,
I have been advised by my RM to hold on to the Series 8 notes. Any advise? Is it better to redempt the notes now, suffering a smaller loss than suffering a greater loss if the situation gets worse?
Thanks.
ReplyAlexis,
I think the question to ask is, what exactly is “the securities issued by Merrill Lynch & Co backing up the notes”?
You might want to get your RM to elaborate on what are the possible risk factors or events that would affect the principle of your notes should you continue to keep it.
He might not have the answer offhand, but you should make him work to find out for you.
And whatever he tells you, have it documented.
ReplyDear Lion Investor
Thanks for the great advises.
Appreciate it!
If any of the members know what securities it is backing do let us know here. Cheers!
ReplyDear Lion Investor
“Mui,
The Jubilee Series 3 had Lehman Brothers as one of the reference entities.
Since Lehman Brothers has gone bust, it triggered a default event. Investors of Series 3 are likely to get back zero or close to zero.
The Series 8 is a different thing altogether and has little to do with Lehman Brothers.”
A quote from your earlier response.
I also bought Jubilee Series 8 notes, according to your earlier reply, Series 8 is different from Series 3 which has a reference to Lehman Brothers as one of the entities.
May I know, how series 8 notes work and what conditions/entities it depends on? As you have mentioned that it is a different thing altogether compared to series 3.
Thanks for your advises, I and as well as many investors here would like to know whether are we crossing a land mine field now.
If yes, we need to know whether we should retreat with some losses now or forge forward bravely as we might be able to clear the land mine field cautiously.
Thanks again for this great website!
ReplyLowbang,
to quote what I wrote earlier:
“The security for the Notes will comprise certain securities issued by Merrill Lynch and the swap arrangements relating to the Notes including the guarantee by Merill Lynch as the swap guarantor.
A look at the Jubilee Notes Pricing Statement shows the securities backing up the notes to be SGD-denominated notes issued by Merrill Lynch & Co., Inc under its US$110,000,000,000 Euro Medium Term Note Programme.”
Only ML knows what they are! Given current conditions, it is likely you can get them to reveal what they are.
ReplyDear Lioninvestor,
thank you for the advice. I believe we should in a concerted manner request the ML reveal what this US$110 billion Euro medium term note programme is all about.
anyone care to comment.
Reply
I am one of those worried investors of MLJS8. I have also been advised by RM in Standard Chartered to wait till the 9th of Oct.
Please keep me updated on news concerning MLJS8. Thanks Lion Investor
Today, 24/10/08, the RM of SCB informed me the quote for Series 8 note is at 85.
I had instructed my RM of SCB to liquidate the Merrill Lynch
Series 8 note at 15% loss of my capital. At least I now have peace
of mind.
ReplyHi,
I just went down to citibank to enquire about the buyback rate for the Jubilee Series 8 notes. It’s about 80% and this rate differs each day. Any advice if I should hold on to the notes or should i just sell it off asap?
Thanks.
ReplyDear Lion Investor
ST’s headline on Structured Investments has indicated that investors may lose all their money invested in Merrill Lynch Jubilee Series 3 LinkEarner Notes.
What’s the difference between this and MLJS8?
Also when MLJS8 was launched, Temasek Holdings has had stake and recently has upped their stake in ML. Does this enhance our position financially?
Your financial advice pls ….. Thanks heap!
ReplyMui,
The Jubilee Series 3 had Lehman Brothers as one of the reference entities.
Since Lehman Brothers has gone bust, it triggered a default event. Investors of Series 3 are likely to get back zero or close to zero.
The Series 8 is a different thing altogether and has little to do with Lehman Brothers.
ReplyI’ve was advised by my “Relationship Manager” in Standard Chartered Bank that they have received calls from anxious investors asking for outcome of this MLJS8 notes too and that SCB is looking into it.
She also promised that she will check & revert on the buy-back price early week of Oct 08.
To date, I am still waiting for their advice … hope SCB live up to their word! Let see …
Any idea who & how I can escalate & pursue this matter further? At what extend can MAS help?
Anyone care to share? Tks
Reply
I am sure the RM told you that the “principal is protected” when you sign the contract. He did not tell you those 4 conditions mentioned and when any of these eventshappens, there is a risk of big loss of capital.
This is very unprofessional of a reputable bank. How can they subject your investment to such high risk when the return is only 3%. Many retalier would think that since it is only 3% return, it should be similar to a fxed deposit.
The bank is using this kind of unfair tactics to lure customer.
You should lodge a complaint with all the authorities and get the bank to cancell the contract and get back your principle before it is too late.
In March 2008 I purchase Capital Protected Note base on a Standard chartered brochure which my he presented me during the meeting which gave the illusion that the CPN is actually a product of Standard Chartered.
On Mid September My private advisor called me at 20:00 and informed me that my funds in the CPN are suspended due to Lehman collapse. As I did not fully understand the connection, he further explains that somewhere down in the brochure it stated that the issuer of the note is Lehman Brother.
This scam should not go quietly! I’m thinking to start legal procedures against standard charter for fraud and deception.
Reply
Hi Mui,
i am in the same situation as u … how did SCB handled yr case??
for me. my mum bought the JS8Notes. but the R/S manager did not highlight the risk involved and played ard wiht the words “Gurantee” and “Protected”
we hv logdged a case with SCB but our case was withdrawn.. cause they have found “evidence” tat the R/S manager DID NOT mislead my mum. a chinese educated lady in her 50s. I wonder how they find the “evidence”
on my hand we hv called the R/S manager prior to this. Does major banks have recording functions on their R/S managers desk??
how shld we purse the case???
anyone advise??
Reply
Oh, and if anyone finds out what the buy-back price is, please let me know. Thanks.
ReplyDear Lion Investor
From what little I have seen of your blogs and intro page, I think yours is a pretty cool website. I ‘googled’ “jubilee series 8 notes prospectus” and hit your article.
I consider myself a fairly savvy investor who focuses on value and wealth accumulation for the long term. When someone I know was approached by a Citibanker to invest in this product, I was consulted on whether it was a good idea to invest in the MLJS8 Notes. The Citibanker had given the impression that the product was guaranteed (she might have even used the word “guaranteed” – I am not certain).
So I had a quick read of the factsheet and prospectus, and thought it was a pretty safe product because it said “capital protected” and was backed by Merrill Lynch, a pretty respectable and solid global financial institution. So the person in question invested in it. Little did I realise (until now) the vast difference between a cast-iron guarantee and what was termed “capital protection”. Had BOA not bought over ML, I am quite certain a vast portion of the person investment would have been lost by now. And of course, there has been no sight nor sound of the Citibanker since the sub-prime contagion started.
This is just a little cautionary tale of all things which appear too good to be true in the investment markets. As always, caveat emptor. There’s no free lunch out there.
As for your website, Lion Investor, I like what you are doing. Keep it up. And thanks.
Warm regards.
ReplyHi John,
Thanks for the encouragement. 🙂
Glad you liked reading what I wrote.
With regards to the buyback price, your friend should be able to get it via Citibank.
Replydear Lioninvestor,
For you information, I have been told by my bank that the buyback price is only available after the 1st 3 months i.e. first week of Oct 08.
ReplyI see. Then I suppose you will have to wait until then to know…
ReplyWhat shoild do now with Merrill Lynch Jubilee Series 8 Notes bought recently ?
ReplyHi Lion Investor
The financial turmoil has been harrowing for me & the Sunday Times article on High Notes 5 has added more to my anxiety.
I have bought the Jubilee Series 8 notes from a Bank. With BOA acquiring Merrill Lynch, what will the implications be?
The only assurance I can get from the Bank is … “the Notes will still continue, if any early termination, we will keep you informed”
What are my losses if I request for premature termination? I’m totally not an expert on investment.
Pls advise.
Mui
ReplyHi Mui,
You can try requesting for the latest buyback price from the bank. For the Lehman minibond product, Lehman provided a pricing every Friday. Your Jubilee notes might have a similar arrangement but I’m not certain.
I believe the product should still continue to run.
ReplyHenry,
Unfortunately, you could be looking at a significant loss on your capital.
ReplyHi Stanley,
If BOA assumes the obligation, the notes will carry on as normal after the takeover. This is probably the case.
Of course, the original risk associated with the original product still remains intact.
You might want to confirm with your distributor.
ReplyDear sir,
I recently bought the Merill Lynch series 8 notes and are very concerned to read about the just announced BoA acquisition of Merill Lynch.
The obvious question that comes to mind is what will happen to my purchased. Can anyone care to explain.
regards,
Stanley Leow
Hi Panzer,
Yes, one does need to be very careful when buying any structured product.
For that, a reading of the base prospectus/pricing guide is a bare minimum.
How many people actually do that?
Reply
Hi Mudnik
Good analysis.
I hate the way financial institutions and agents push their products using unclear terms and promising orally of the great returns and safety when in fact these can potentially be as toxic as the collateralised debt obligations that were bandied around by the US banks prior the sub-prime fiasco.
Be well and prosper.
Reply