MAS has been informed by HSBC Institutional Trust Services (Singapore) Ltd, the trustee for the Lehman Minibond notes programme, that the receivers for the Minibond notes series 5 to 10, have taken steps to terminate the swaps between Minibond Ltd and Lehman Brothers Special Financing Inc for series 5 to 8 of the notes. This action follows earlier steps to terminate the swaps in the underlying securities for series 1 to 8 of the notes, and is part of a series of steps that the receivers are taking to minimise risks to noteholders. MAS understands that similar steps will be taken for series 9 and 10 which defaulted on 29 November 2008, and the rest of the Minibond notes series as and when they default and receivers are appointed for them[1] .
Restructuring Not Viable Currently
2. The trustee has also informed MAS that it has received notice that the lawyers acting in the Chapter 11 proceedings for Lehman Brothers in the United States have reserved the right to challenge actions taken by the trustee on the notes. Given this development and the complexity of the legal issues involved, the trustee and receivers are of the view that restructuring is not a viable option at the present moment.
3. Deloitte & Touche Corporate Finance Pte Ltd (DTCF), the independent financial adviser appointed by MAS on the Lehman Minibond notes programme, concurs with the decision of the receivers to terminate the swaps between Minibond Ltd and Lehman Brothers Special Financing Inc. In addition, pending further clarity over the legal issues and the resolution of any litigation involved, DTCF understands that the receivers are not presently able to either restructure the notes or to realise value by selling or liquidating the underlying collateral.
MAS' Views
4. MAS understands that noteholders will be concerned about how the legal issues which have surfaced will impact their investments. MAS has therefore asked the trustee and receivers to resolve the legal complexities as quickly as possible and to take all necessary steps within their powers to safeguard noteholders’ interests. We expect 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.
5. These legal issues do not affect the handling of complaints according to the three-step process set out by MAS. We require distributors to have a rigorous process to look into every complaint and to ensure that legitimate grievances are dealt with fairly, regardless of the outcome of these legal issues. Noteholders who are not satisfied with the outcome of a distributor's complaints resolution may have their complaints referred to the Financial Institutions Dispute Resolution Centre (FIDReC) for mediation or adjudication. MAS will continue to keep noteholders updated on developments.
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