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Hi Kwan,
Thanks and we’ll take it off line.
Good news is with 3 white knights, I hope one will come thru.
Thanks,
HK5D
ReplyHello HK5D,
I am prepared to join you in a working group and have meetings to discuss on how to maximise recovery. I know of another person who is prepared to join in. Discussion as a team with the Trustee and other relevant parties such as the FI, the Independent Party and FIDeC will be more effective. I have some knowledge in this field. Inability to find a replacement swap party should not automatically lead to liquidation of the underlying securities. Please reply to me directly on how we can meet up.
Hi Lye,
“For things you cannot control, don’t bother.” This I feel is one of them. As long as a good bank takes over, we will be given a temporary life line.
Mr. Tan preferred local institution but it may turn out otherwise.
Let’s wait and see. We have already waited for a month. My future plan is still going to FIDReC as this product is still too dangerous to continue.
Regards,
ReplyHello HK5D,
HSBC seems to be keeping the valuation thing a secret. Each conversation I had with them, they always say that they are still in the process of valueing the underlying securities. Seems to be taking ages on this!
When I asked them on the news of the swap counterparty, they say still waiting for confirmation. Mr. Tan KL said that a big HK bank is interested in the take-over, you have any news on that ??
Pls share your class suit with all of us when you have summarised it.
It is time that we act, before everything is liquidated and we gets peanuts !!
ReplyWith the on-going and usually muted govt comments, I kinda want to believe the search for a new swap guarrantor may be successful. This solution will helps to cool off the situation and for MAS to score a point over HK MAS that Sgp approach is more successful.
But having said that, it means the contract will continue to run. The credit events can still happen if:
i) any 6 of the RE declared bankrupt -> most unlikely
ii) >10 underlying securities defaulted -> likely
iii) Swap guarrantor or Issuer defaulted.
From CNBC, they are looking for the outcome of CDS situation on tuesday. Something to do with calling in the CDS after Lehman collapse. My interpretation is basically insurance payout due to Lehman collapse. Maybe this is the reason why we can only get our answer by end of the week i.e. new swap guarrantors wants to know whether there are money to be made.
ReplyHi Kenneth,
Let’s hope for a positive outcome on the new swap counterparty. While this may be look good at the moment compared to liquidation, there are still potential risks ahead as you’ve stated.
And of course the new party will want to make $$ too, no one is so dump to do charity work on such a widescale. We keep our fingers crossed.
ReplyCould the bank interested to take over as swap counterparty be HSBC itself? Mr Tan said this HK bank is bigger than local ones, and HSBC is the only one I can think of which is based in HK.
ReplyMy friend who bought the dbs product told me that dbs has advised him the payout is 8%. Not sure this is indicative or confirmed?
HK5D any info?
ReplyNot sure but I would image that it is probably. It is so close to zero that chance for error is not that high.
Hong Kong is getting one of the big-4 CPA firm to value before coming out with pricing.
ReplyHK5D,
In Tan Kin Lian’s blog, one writer posted that he or she met up with HSBC and HSBC conveyed that if there is no one to take over as counter party, they will go ahead to liquidate.
Do you have any info on the Minibond 5 and 6 valuation? Also are you working with Mr. Tan Strategy committee to come up with some starategy really fast as that decision will be end of next week!
ReplyHello Ho,
I recall in one of the MAS announcement it does say they had some discussion with HSBC Trustee on not doing immediate liquidation by the book. How much time this is going to buy us is not clear.
Valuation info is just not available in Singapore.
There is some discussion string about organizing a central planning committee but nothing is concrete as far as I know.
Right or wrong, I think how things are evolving is like Wikipedia. Everyone try to contribute based on what they know creating a piece of the puzzle at a time.
P.S. I just finished attending a group meeting with a lawyer on the feasibility of class lawsuit. With the amount involved and the number of people involved, the legal fee may not be that much and it beats us playing DIY lawyer, financial analysts, etc. etc. I will write a summary tomorrow to share.
ReplyCNBC just reported the headline of banks in Hong Kong will be buying back MiniBonds (deadline called for by the Hong Kong governor couple of days ago). Details are not yet included. The reporter asked HKFA if a Press Conference will be held today and answer is no. I think details will be coming out today. If anyone has new info, please update us. If there is information available, I will try to print them out for the SAT meeting tomorrow at the Speakers’ Corner.
Newspaper link I found so far (any subscriber has details?):
http://www.hkej.com/template/dnews/jsp/toc_main.jsp
For those of you who are interested in meeting other investors grouped by product/institutions, please come to the Speakers’ Corner this SAT 6-7 p.m.
One of the proposed theme is to ask the head of MAS to go down for the lack of actions up to now and especially if Singaporeans got less money back than their Hong Kong counter parts.
金融局长下台!!
It is not such a crazy idea. The Hong Kong HKFA might go first!
http://www.stnn.cc/hongkong/200810/t20081015_879547.html
ReplyI think I said it in the blog before – valuation is an extremely hazardous exercise. Beryl and Zircon are synthetic CDOs, where Lehman basically sold protection against the default of 100-130 entities (both corporate and financial companies). The portfolio weighted average spread was probably 120bps then. The same portfolio now would have a weighted averaged spread of say 300bps-500bps .Someone who would come in & replace Lehman as protection seller would ask oneself “why would I want to sell protection at 2006/7 levels in today’s catastrophic environment ?” No rational commercial institution would do that other than Barclays and Nomura whom I suspected have bought over some Lehman liabilities as well as assets. If you do not have a counterparty to step in, you would have a void in the CDS contract. When that happens, the protection buyer would simply stop paying (as it already had since Lehman’s filing). In effect, the underlying securities such as Beryl and Zircon are not generating any income or, more importantly, severing its original intended purpose. If a full unwind is intended, what’s next ? You need to ask yourself how much Beryl and Zircon are worth. You would then repeat the same exercise you done on minibond, which is to look at what are the underlying securities backing these Beryl & Zircon deals. Like you said it is Russian doll ! But I think some of these deals are back by bonds issued by GE, which is hopefully where the buck stop.
Another problem which adds to the complexity is that when Lehman sold protection in the credit derivatives market, in practice, you wouldn’t necessary know which trade position belongs to minibond/beryl/zircon as Lehman probably commingled everything into one trading book. Within this trading book, some positions are hedged, some are square off against others, some are not hedged at all (e.g. It was not worth while to hedge 5yr protection on AIG which was traded at10bps not too long ago !)
Mind boggling stuffs for those of you who mistakenly got into these products for mere 125bps-200bps incremental fixed returns. Whereas, the downside is unlimited.
I still think satisfactory resolution would require some divine interventions from the government .
ReplyHi Del Boy,
Thank for giving us a good grasp and insight of the picture.
I was also informed by Maybank that is one of the underlying securities
for Beryl is General Electric (GE). If this form a large portion of the
bloc of securities, then maybe the valuation could be higher, because Warren Buffet has just injection billions into this company.
HK5D
Can you explain the notice issue by HSBC Trustees here regarding the underlying securities. I posted it here at http://drop.io/minibond
ReplyHi Steve,
Yes, I did go thru the documents before I compiled the table. The HSBC document is just what they are requried to notify the distributors and the note holders that interest payments are in default and also what the potential action going forward.
So, there were no estimated recovery in the two documents you posted. And, I will update the tables next time I make a pass at it.
Regards,
HK5D
P.S. Please drop me an email to [email protected] on how to contact you as I am trying to get some MAS meeting updates for the upcoming meeting at the Speakers Corner this SAT.
ReplyAt the risk of errors and outdated, I am gathering information in the webs on estimates on how much people can recover from MiniBond type stuffs for both Hong Kong (as reference as they have more numbers) and Singapore. Corrections and updates are welcome and we can make this into a living document.
HONG KONG (Total 36 Series of MiniBond) and Sources:
http://hk.news.yahoo.com/article/081006/4/8krk.html
http://gb.chinareviewnews.com/doc/1007/6/3/9/100763948.html
#1-#4: 60-70% as “others” per Source1 and Source2 (applies to all others below)
#5-#6: 60-70% per Source2. About 0% per Source1 which maybe wrong.
#7-#9: about 0% as Lehman is reference entity per Source1 and Source2.
#10-14: 60-70% in Source1.
#15-#18: <50% as SubPrime Mortgage based per Source1. =50% per Source2.
#19-36: 60-70% as others. #21; #27 Interest past due.
The Hong Kong approach is pressuring the banks to buy back based on market value.
SINGAPORE (Total how many series?)
http://www.hsbc.com.sg/1/2/miscellaneous/minibond-notes-frequently-asked-questions
http://drop.io/minibond
#1-#3: synthetic portfolio notes issued by Beryl Finance Limited.
#5-#6: Interest past due! Synthetic portfolio notes issued by Zircon Finance Limited.
#7-#8: 9% (i.e. 9 cents) and 2% respectively. Interest past due! Synthetic portfolio notes issued by Beryl Finance Limited.
#9-#10: floating rate notes issued by Wachovia Corporation.
The Singapore approach as per MAS article, is to find swap counterparties replacement. No estimates on how much can be recovered are given.
The Trustee in Hong Kong is actually HSBC USA so they are taking their sweet time in releasing collateral information. The Trustee in Singapore is HSBC Singapore and information has been release so Singapore definite won this part of the race.
And, we are not saying that the MiniBond series are the same across Hong Kong and Singapore. Someone suggested a way of identifying them by some serial numbers like stuffs but I have not be able to do that comparison. Can anyone help?
Again, your update and correction to payback estimates are welcome.
ReplyThe numbers for #7 and #8 and not correct. No estimation is available.
ReplyThanks for the correction, lioninvestor! I will update that next time I revise the table.
So, if not 9 cents and 2 cents, what would be our guestimate? Well if Hong Kong has the same stuffs in each of the series, then, according to the Hong Kong table above, this means it is more like zero.
Oh, I did get Richard giving me the golden key on how to find out if Hong Kong series and Singapore series are the same. Here is what he wrote:
“To check whether the series is the same , I think we can check whether the Hong Kong series has the same portfolio and ISIN:
“For example, Mini Series 2 is Beryl Finance Ltd Synethetic Portfolio due
2012 ISIN:XS0382664620, Series 3 Beryl Finance Ltd Synethetic Portfolio
ISIN XS0382664976”
Now that I got the golden key, I don’t know how to find the key holes:-( May be some Hong Kong investors can check what they bought and get back to us in the blog. We can help the Hong Kong investors too because Singapore HSBC Trustee has released information about the collaterals. Example is that Beryl Finance above which is in Cayman island. I think it is probably like a Russian doll – meaning when you open one layer, only to find another layer underneath.
Of course, there is an easier way. Do any of you have any friends (still friends?) or relatives who used to work at Lehman? Find out the answer and post in the web please. Thank you so much!
ReplyHi
Is there any update on the possibility of a “white knight”?
Time is running out. It’s scary!
Thanks
ReplyI have invested $100k of minibond series5 from UOB Kay Hian and I got
very worried that I might not get back a cent.
Hi Linda,
Series 5 and 6 is in the frontline.
It would be better for those holding onto these two series to get together and approach HSBC Trustee to hold in abeyance the sale of any underlying securities, because Wall Street is starting to pick up and besides the bailout plan by the US Treasury is still not implementated.
Reply