Buyers of Lehman Brothers-linked minibonds may be reimbursed for up to 96.5 percent of their original investment if a deal between PriceWaterhouseCoopers and the primary custodian of assets of the former Wall Street titan sees the light of day.
PwC is the receiver of collateral for minibonds sold in Hong Kong. The deal between the accounting firm and Lehman Brothers Special Financing is backed by the 16 local distributing banks that sold the notes to 31,000 investors.
"The receivers are of the opinion that the proposed level of recovery represents the best possible outcome for investors considering the legal uncertainty that still hovers over the claims on the collateral," Hong Kong Association of Banks chairman He Guangbei said.
He was speaking on behalf of the distributing banks, which in 2009 agreed to pay back up to 70 percent of the claims of disgruntled investors.
But this failed to satisfy all claimants. PwC yesterday floated the latest proposal that now must be approved by a US Bankruptcy Court hearing in April and 75 percent of investors in each of the following series of minibonds: 10 to 12, 15 to 23 and 25 to 36. The investors are due to meet in May.
PwC was appointed receiver of collateral by HSBC Bank USA, which is the trustee of all Lehman minibonds sold in Hong Kong.
Most of the distributing banks have already given back 60-70 percent of claims worked out under the 2009 deal.
Future payments will involve paying a portion of the remaining 30-36.5 percent.
The banks want to offer an ex-gratia payment of up to 15 percent of the principal to eligible customers equivalent to 50 percent of any shortfall in the recovery of the amount invested.
Investors can receive 85 percent to 96.5 percent of the investment principal amount after the ex gratia payment. The lenders, including Bank of China (Hong Kong) and Bank of East Asia, will increase the funding provision to the minibonds trustee - HSBC Bank USA - to HK$662 million from HK$291 million. If the prerequisites are met, the 31,000 minibond investors will get their money in June.
BOCHK, as the largest vendor of Lehman minibonds, now expects to lose less money than earlier expected. The bank had made a provision of HK$4 billion for losses, now it expects losses of about HK$1.4 billion.
Hong Kong Monetary Authority deputy chief executive Arthur Yuen Kwok-hang praised the plan, saying it is ``an important development'' that allows investors to avoid lengthy litigation and potentially costly fees and legal uncertainty.
``But it also represents the concerted efforts among regulators, the participating banks and the relevant investors to recover the invested amount as far as practicable, '' Yuen said.
He, who is also Bank of China (Hong Kong) chief executive, believes the current proposal will get the support of customers and the public alike so that it can be carried out smoothly as soon as possible.
Meanwhile, HSBC Bank USA said it considers the plan to be a good solution to a complex situation.
