It's such a long-running tussle I hope the additional payment offered by 16 distributing banks of Lehman Brothers minibonds can bring an end to the saga that has consumed so much energy.
Yesterday's package was indeed an improvement from the 2009 class deal offering a 60-70 percent buyback. Conditional on acceptance by the US courts and "yes" votes from Hong Kong investors holding 75 percent of the minibonds, they can look forward to recovering as much as 85 to 96.5 percent of their original investment.
Perhaps for minibonds investors elsewhere, the latest offer would sound too good to be true. Singaporeans got only half of their money back. I'm not sure how thrilled they would be after seeing SAR authorities winning more for their investors in the minibonds case.
According to the distributing banks, the latest package comprises two parts: recovery payment from the residual value of recovered collaterals, and ex- gratia payments from each of the banks. The ex-gratia payment is equivalent to half of the difference between investments and their residual values. That's highly unusual in a financial world where investors are educated to bear the risks.
Yesterday, diehard minibond buyers said they wouldn't accept the latest offer, arguing the sum could not reflect "mistakes" committed by banking staff when promoting the minibonds.
Arguably, this is more a question for the courts to decide, but so far, nobody has been found guilty. On the contrary, the District Court acquitted a Bank of China (Hong Kong) manager of all charges in relation to selling the Lehman securities, in the first case tried.
Certainly, regulators and law enforcement agencies haven't completed their investigation. However, it would be in the interest of justice to save the benefit of doubt until the accused is convicted of sinful acts.
At present, it's unlikely the diehards' opposition will derail the latest breakthrough when general meetings are held to vote on the deal. As a matter of fact, prior to yesterday's development, more than 90 percent of minibonds investors had accepted buyback offers under either the 2009 deal or other terms.
It may be baffling why the distributing banks are willing to offer ex-gratia payments if it isn't an implicit admission of wrongdoing.
But it's a win-win deal for all. For the concerned minibonds investors, they can get as much as 96.5 percent of their investment back. For the participating banks, they can write back a substantial part of their provisions made for the securities the year before.
It would be in the interest of society as a whole - even though it may not conform with commercial principles.
Now, banks can concentrate their efforts in marching forward after resolving the matter. Let's bear in mind that Shanghai is catching up fast, and Hong Kong could lose out if it continues to allow its energy to be exhausted by the drawn-out saga. Frankly, the ex- gratia payment is more like a sweetener and not totally free of moral hazards. I hope it won't be taken as a precedent, since repeating this could risk compromising the market principle on which the SAR's status as a financial center is based.
There are skeptics questioning whether PricewaterhouseCoopers as receiver had fought to gain the best deal from the US liquidator - with some even suggesting there may have been an under-the-table deal.
Such skepticism is unwarranted. What can the consultancy firm gain? Its fees are borne by the distributing banks who have even committed to sharing the legal costs should it be necessary to mount a legal fight in the United States.
Given the offer on the table, I can't see why it's not a good deal to accept.
The moral hazard, however, is that many investors, especially those who have lost money in securities, are regretting they didn't invest in Lehman years ago.
