Further recovery of Minibond collateral

The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) note the announcement by PricewaterhouseCoopers (PwC), the Receivers of the Minibond collateral, concerning the unwinding of Minibond series 5 to 7 and 9 (Note 1).

Under the agreement between the SFC, HKMA and 16 distributing banks in relation to the repurchase offer of Lehman Brothers Minibonds, eligible customers are entitled to receive an additional top-up payment from the Minibond distributing banks, subject to the recoveries of the underlying collateral of the Minibonds (Note 2 and 3).

Noteholder meetings will be held in July 2012 to vote on the unwinding of the relevant Minibond series. A majority of the 75% or more is required for the unwinding to proceed.

Since the current estimated percentage of recovery is about 30% of the principal value of Minibond series 5 to 7 and 9, eligible customers who were below the age of 65 as at 1 July 2009 and accepted the Minibond Repurchase Offer (Offer) will receive a further payment of 10% of the principal amount. This will bring the payments they received from accepting the Offer up to a total of 70% of the principal value, on par with those eligible customers who were aged 65 or above as at 1 July 2009 (Note 4).

The SFC and HKMA believes a return of 70% for eligible customers is a good outcome given that the underlying value of their investment is in the region of 30% (Note 5).

Notes:

1. The Receivers' announcement is available on PwC's website at (http://www.pwchk.com/home/eng/minibonds_2.html).
2. Please see the press release of the SFC and HKMA of 22 July 2009 concerning the agreement reached between the SFC, HKMA and 16 Minibond distributing banks. The banks are The Royal Bank of Scotland N.V. (formerly known as ABN AMRO Bank N.V.), Bank of China (Hong Kong) Ltd, Bank of Communications Co Ltd, The Bank of East Asia, Ltd, Chiyu Banking Corporation Ltd, Chong Hing Bank Ltd, CITIC Bank International (formerly known as CITIC Ka Wah Bank Ltd), Dah Sing Bank Ltd, Fubon Bank (Hong Kong) Ltd, Industrial and Commercial Bank of China (Asia) Ltd, Mevas Bank Ltd, Nanyang Commercial Bank, Ltd, Public Bank (Hong Kong) Ltd, Shanghai Commercial Bank Ltd, Wing Hang Bank Ltd, and Wing Lung Bank Ltd.
3. The recovery percentage for Minibond series 10 to 12, 15 to 23, and 25 to 36 ranges from 73.49% to 95.10%. Please see the press release of the SFC and HKMA dated 27 March 2011 and the Receiver’s announcement dated 15 June 2011 concerning the distribution of the underlying collateral for Minibond series 10 to 12, 15 to 23, and 25 to 36.
4. Eligible customers who were aged 65 or above as at 1 July 2009 had already received 70% of the principal value for accepting the Minibond repurchase by the Banks.
5. The collateral of Minibond series 5 to 7 and 9 were securities issued by Lehman Brothers and all collateral claims are unsecured debts in the bankruptcy of Lehman Brothers.
6. For enquiries, please contact:
   
   Securities Futures Commission:
   Jonathan Li at 2283 6808 or Ernest Kong at 2840 9335
   
   Hong Kong Monetary Authority:
   Rhonda Lam at 2878 1480 or Yokee Wong at 2878 1213

Hong Kong Monetary Authority
4 June 2012