Thursday, October 1, 2009

Minibonds payback

Source: Straits Times Oct 1, 2009
Minibonds payback
By Francis Chan

INVESTORS of Lehman Minibonds who are still holding the credit-linked notes should get some money back in 'a few months', said PricewaterhouseCoopers Singapore (PwC), receivers of the toxic investments on Thursday.

The announcement will bring some cheer to investors who were unable to come to settlements with distributors that sold the products. It also allays fears that the process to recover some of the hundreds of millions of dollars lost would be bogged down in lengthy cross-border legal wrangles.

PwC said the receivers have taken control of the underlying collateral of the notes and have started the process of realising the residual values before paying noteholders. The collateral consists mainly of corporate bonds held by two special purpose vehicles in the Cayman Islands.

The receivers reached an agreement recently with Lehman Brothers Special Financing (LBSF), the swap counter-party in the Minibonds programme here.

This deal clears the way for the next step, which involves the receivers appointing a disposal agent - believed to be a global investment bank - within the next few days.

The agent will begin liquidating the underlying collateral so that certain payment obligations, including some due to LBSF, can be made. The balance of the funds will be distributed to noteholders.

The amounts they receive will depend on what series or tranches of notes they are holding. PwC said the process will 'take a few months to liquidate the collateral and determine the actual value which can be realised'.

Although PwC could not say when noteholders might get some money back, or how much they will get, due to confidentiality obligations.

'This settlement provides certainty to the noteholders that at least some of their initial investment will be recovered,' said Mr Dominic Nixon, a partner at PwC and one of three appointed receivers from the audit firm.

The Monetary Authority of Singapore (MAS) said the deal with LBSF does not affect any claims individual investors are making against the financial institutions that sold them the notes.

'Investors who accepted partial settlement offers ... would have retained a portion of the notes, and will get to keep the residual value arising from those notes,' said MAS on Thursday.

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