Bond holders who have turned their noses up at two issuers seeking to defer payment or cut into their principal are fast realising how difficult it is to assert their rights. Their frustration is now centred on DB International Trust, the trustee appointed to represent the interests of bond holders in Perisai Petroleum Teknologi and Rickmers Maritime.
The trustee is tasked with pursuing remedies and communicating with the issuers on bond holders' behalf. In the event of a default, bond holders can tell the trustee to demand accelerated payment. But the reality, as Perisai bond holders argue, is that the acceleration process is not quite so transparent.
According to e-mail correspondence produced by bond holders, DB International Trust had required a deposit of US$54,000 (S$74,100) and an indemnity form signed by holders of at least 25 per cent of the $125 millionnotes in order to serve the acceleration notice on Perisai.
DB later reduced the deposit to US$10,000 after bond holder objections, with the balance to be funded subsequently.
In the Rickmers case, holders of its $100 million bonds had twice requested DB to put out notices to individual investors in order for them to connect at independent meetings to discuss the appointment of their own financial adviser.
Both requests were rejected by DB, which said in e-mails that it had been told by the Central Depository (CDP) that any requests for the list of holders and nominees must come from the issuer.
A Singapore Exchange spokesman clarified yesterday that the CDP will request documentation from the trustee to verify that it is empowered under the Trust Deed before providing the list of note holders. A spokesman for DB International Trust declined to comment, citing confidentiality.
As talks with DB drag on, some bond holders have questioned the usefulness of the trustee. But Associate Professor Victor Yeo of the Nanyang Business School said: "When you need someone to act on behalf of so many people, it will take time."
Prof Yeo said the heart of the issue lies with the way the bonds were marketed and sold here, rather than a lack of corporate governance processes. "The question is whether it is a valid assumption that having more than $2 million in assets means you want to go and educate yourself (on the products). Unfortunately, a lot of bond holders don't really read the trust deed and it's not explained to them."
He added: "As a bond holder, you should know that you're lending money to a company and if the company can't repay because of operational challenges, you won't get your money back."