MAS Statement on Lehman Brothers Minibonds:

MAS has received queries on the options available for Lehman Minibonds' noteholders.

HSBC Institutional Trust Services (Singapore) Limited (the trustee) has informed MAS that the 15 day grace period for the coupon payment for Series 5 and 6 of the Minibond programme expired today and no payment has been received.  As such, an event of default has occurred.

As requested by some investors, the trustee will consider all proposals for a new swap counterparty to replace Lehman Brothers for all series of the Minibond programme. We understand that a few financial institutions are currently considering taking on this role. Should there be a firm offer from an appropriate party,  the trustee would seek the necessary approvals from noteholders.

If there is no viable proposal for a new swap counterparty or if a proposal is not approved by noteholders, the trustee would commence selling the underlying securities and would use the proceeds to pay the noteholders after deducting any other liabilities which are payable. This would take place once an event of default occurs.  MAS would expect the trustee to act in noteholders’ interest by disposing of the underlying securities in an orderly fashion.

It is in the interest of investors for the trustee to fully review all proposals for a potential swap counterparty so that investors can vote to remain invested in the notes or for a sale of the underlying securities. This course of action should be fully explored before other alternatives, including a potential buy-back by other parties such as the distributors, are considered.

We have asked the trustee to expedite its considerations and keep investors fully informed of their options.  Investors should refer to the trustees' new FAQs which will be available on its website from tomorrow.