The Swiber Holdings bonds sold by DBS Bank to clients were rolled out to voracious demand, at a time when the company and oil prices were going strong. So DBS should not be singled out for scrutiny over bondholders' exposure to Swiber's demise, a bank spokesman noted, in response to claims that DBS and its staff may have pushed the Swiber bonds to clients who were little aware of the products' risk profile.
Swiber this week defaulted on its semi-annual payment for its $150 million 001 Trust Certificates.
A self-employed man, who wanted to be known only as Mr Jin, said he had invested $500,000 in two Swiber bond issues through DBS. "I was simply following the advice of my relationship manager, who never told me much about the company. I just thought, a bank in Singapore, with this much regulation, would not recommend risky investments," the 44-year-old said.
DBS said the sale was driven by demand: "Many clients were reaching out to us and... private banks for yield instruments, given the very low interest rate environment."
There are two outstanding vanilla Singdollar Swiber bonds: a $160 million issue in 2013, with an annual yield of 7.125 per cent, got orders of $240 million; and a $100 million issue in 2014, with a 5.55 per cent yield, had over $500 million worth of orders. The bonds were distributed by various banks here, including United Overseas Bank and OCBC.
Market conditions were positive, and concerned investors had plenty of chances to exit, DBS added.
"The two bonds were issued in 2013 and 2014, when oil prices were still above US$100 a barrel and Swiber stock was trading above $1."
The Swiber bonds were available only to accredited investors - with net personal assets of more than $2 million - or those investing a minimum of $250,000.
Mr Jin said: "I'm a new immigrant and could barely understand English. I just signed whatever papers the relationship manager gave me."
Another investor, who asked to be known only as Laura, 34, and a banker, said: "My banker said DBS could lend me money to invest, so I'm 50 per cent leveraged on Swiber bonds. Now they've defaulted, I'm asked to pay the bank $250,000 by next Tuesday to cover the margin."
The DBS spokesman said: "DBS does lend against all eligible and acceptable market securities, and investment leverage is offered to wealth customers based on prudent underwriting standards. This includes imposing criteria on the credit quality and duration of fixed income securities as well as requiring the underlying investments of each customer to be diversified."
DBS relationship managers are rewarded based on a balanced scorecard, and there is no direct link between sales targets and remunerations, the spokesman added.
SEE FORUM A50
OUTSTANDING PLAIN SING$ SWIBER BONDS
Annual yield: 7.125 per cent
Orders: $240 million
Annual yield: 5.55 per cent
Orders: Over $500 million