Martin Lee @ Sg
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What My Lehman Minibonds Are Exposed to

Thanks to my helpful broker, I managed to obtain a list of the underlying securities for my Lehman Minibonds series 2. The list had 138 entities(!), with ratings from AAA to B and from countries all over the world.

The way the Lehman Minibonds were setup meant that I was also exposed to the credit risk of all these entities. If there are a few defaults among them, my principal might be affected. This realisation might turn out to be a shock to those investors who bought looking only at the reference entities.

Thankfully, they are mostly corporate entities and I didn’t see any traces of subprime loans inside them. Some of the companies in the list include:

  • Ambac Assurance Corp
  • Bear Stearns
  • Beazer Homes USA
  • Citigroup
  • Barclays Bank PLC
  • Berkshire Hathaway
  • Countryide Home Loans
  • Deutsche Bank
  • Ford Motor
  • Flextronics International (only Singapore listed company in the list)
  • France Telecom
  • Hutchison Whampoa
  • Southwest Airlines
  • MBIA Insurance Corp of Illinois
  • State of Qatar (Sovereign)
  • Exxon Mobil

Nevetheless, some of these companies were badly affected by the subprime crisis. Hopefully (hope can be a fatal word in investing), the number of credit defaults will be less than the number required to cause capital loss in the principal.

If you own Lehman Minibonds, you can try asking your distributor to provide you with the list.

Leave a Comment:

sureesh says 14 years ago

I think this thread should be resurface now that minibond holders will get some of their money back.
Anybody got any updates. Any idea how much we should get back. problem is the unwinding processis not transparent.

lioninvestor says 15 years ago

Hi Lee,

In case of an unwinding, the minibonds are backed by the underlying securities.

I have posted the estimated valuation of the minibonds as provided by Lehman last Friday:

Lee says 15 years ago

Isn’t there a Trustee for the Minibond funds? even though Leyman Bro were the arranger of the Minibond. What if the underlying companies are still intact?

lye says 15 years ago

Hi, any latest information about Minibond? If Lehman go bankcrupt, how will it affect Minibond?

lioninvestor says 15 years ago

Hi Lawrence, based on how I interpret it, the redemption value of the Lehman minibonds should be affected only if there are defaults.

For the moment, the downgrades would affect the mark to market valuation of the minibonds.

lawrence ho says 15 years ago

Curious, with MBIA and Ambac being downgraded does it mean the doom of the Minibond? Or they must evidence a credit default event other than downgrading to bring the bonds down?

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