LEHMAN Minibond investors will have more clarity by the end of this month on their investment, the Monetary Authority of Singapore (MAS) said yesterday.
MAS said that it had asked the trustee, HSBC Institutional Trust Services (Singapore) Ltd, to work towards providing noteholders with an update on whether restructuring is still a viable option by the end of the month at the latest.
Last month, three financial institutions were said to be submitting restructuring proposals which would essentially mean taking over the underlying securities and holding them until maturity.
Investors bought the now defaulted Minibonds arranged by Lehman Brothers worth $508 million over the last two years, of which $375 million worth was sold to about 8,000 retail investors through nine distributors.
Aggrieved investors have taken to petitioning the government. Some have banded together to consider the possibility of legal action against the distributors and others have been rallying at Speakers' Corner - all hoping that their actions will result in getting some of their money back.
So far, only vulnerable elderly investors have got their money back from the distributors - after some arm-twisting by MAS.
Yesterday, the trustee also said that it had terminated the swap in the underlying securities for Series 1 to 8 of the Minibond notes programme.
MAS said that this removes the risk of credit event in the underlying securities and helps preserve the value of the underlying collateral. This action is not necessary for Series 9 and 10 as the underlying securities for these notes are corporate bonds and have no swaps.
The Minibond notes were complex structured products but, ultimately, their underlying collateral is backed by plain vanilla US corporate bonds.
While the prices of these corporate bonds have also been hammered by the financial crisis, they have value if held till maturity, provided they don't default. The trustee has also appointed three partners from PricewaterhouseCoopers (PwC) Singapore as receivers for the notes.
The receiver's role is to take control of the assets of the notes and to work closely with the trustee towards a solution which is in the best interests of the noteholders.
Asked about the value of the notes, PwC partner Goh Thien Phong said: 'At this stage, it is too early to speculate on or assess the valuation of the notes. The receivers will be managing the enforcement process and take into consideration a variety of factors, including the prevailing market conditions in relation to the underlying securities, before coming to any conclusions.'
MAS has, in the meantime, appointed Deloitte & Touche Corporate Finance Pte Ltd (DTCF) as an independent financial adviser to consider the restructuring proposals and advise noteholders if a viable proposal emerges.
Noteholders will have to vote on any proposal submitted. But if the receivers, in consultation with DTCF, conclude that restructuring is not viable, the receivers will proceed to liquidate the underlying securities and the proceeds will be paid out to noteholders after deducting any liabilities, including expenses that are payable.
MAS managing director Heng Swee Keat said that the trustee is taking reasonable and appropriate steps to protect the interests of noteholders given current market conditions.
'The appointment of DTCF as the independent financial adviser is also an important step to ensure that noteholders' interests are served,' he said, adding that MAS is also making progress in attending to investors' complaints.
This article was first published in The Business Times on November 13, 2008.
