Attempts to keep the ill-fated Minibonds alive appear to have failed, wiping out the hopes of about 8,000 retail investors of getting a significant portion of their money back. -- PHOTO: CAROLINE CHIA
LAST-DITCH attempts to keep the ill-fated Minibonds alive appear to have failed.
This has largely wiped out the hopes of about 8,000 retail investors of getting a significant portion of their money back. These investors had sunk about $375 million into the complex products, linked to collapsed United States investment bank Lehman Brothers.
The products will now be unwound and investors will face more uncertainty in the months ahead.
HSBC Institutional Trust Services Singapore, the trustee for Minibonds, said yesterday that proposals to restructure the product - principally by having a new swap-counterparty take over Lehman's role in the Minibonds programme - have been ruled out for now.
The Straits Times believes that one of the reasons why restructuring options have dried up, was that potential counterparties could have been deterred by problems in valuing the underlying collaterals of the notes.
Valuation problems could, in turn, also have been the result of legal complexities introduced by lawyers involved in US bankruptcy proceedings for Lehman, who are reserving the right to challenge all aspects of the unwinding process for Minibonds.
Whatever the reason, Minibond noteholders face a potentially long litigation process.
Three partners from PricewaterhouseCoopers Singapore (PwC), as the appointed receivers for Minibonds, are proceeding to unwind the product, which has legal documentation governed by as many as four different jurisdictions including the US and the Cayman Islands.
Although the receivers cannot commit to a specific timeframe for the unwinding process, they say it could take at least two years or more to resolve.
In turn, investors will have to hope that the receivers succeed in salvaging whatever they can from the failed product's assets before determining if they can get any money back at all.
One investor, who asked to remain anonymous, said: 'I'm sure there will be very little residual value left - don't forget they still have to pay for the unwinding process, so I guess it'll just be like DBS High Notes 5: Worthless.'
The investor was part of an investor group which first petitioned the Monetary Authority of Singapore (MAS) and the trustee to explore restructuring options on Sept 24.
Plans by banks in Hong Kong to buy back Minibonds have also been derailed by similar legal complexities.
According to the Hong Kong Association of Banks, the trustee has also received notice from lawyers in the US 'regarding the seniority of different types of creditors'.
To date, Minibond series 5 to 10 have already defaulted, while Series 1, 2 and 3 are also expected to go into default soon. Series 4 does not exist in the programme.
Mr Dominic Nixon, one of three receivers and a partner at PwC, appealed for patience from investors, saying that due to a 'multitude of factors that are not within the immediate control of the trustee and receivers, this cannot be resolved within a short span of time'.
Separately, the MAS said yesterday that it expects the trustee, receivers and distributors 'to do their part to ensure that noteholders' legal rights are vigorously defended, and to put in the necessary resources to do so'.
MAS added that it does not expect the legal issues to affect the ongoing complaints handling process by financial institutions.
