Hong Kong Banks Offer Formal Minibond Settlement

Hong Kong Banks Offer Formal Minibond Settlement, Sing Tao Says


By Kelvin Wong

July 3 (Bloomberg) -- A group of 16 Hong Kong banks that sold so-called minibonds linked to Lehman Brothers Holdings Inc. have sent a formal proposal to the city’s securities regulator to settle on a refund to investors, Sing Tao Daily reported.

The banks may suffer losses of as much as HK$1.5 billion ($193.5 million) in the proposal, the Hong Kong-based, Chinese- language newspaper said, without saying where it obtained the information. The banks offered to repay investors between 60 percent and 70 percent of the principle of credit-linked notes arranged by a local unit of failed Lehman, Sing Tao said.

Losses sustained by individual investors on the notes, which lost almost all their value after Lehman collapsed, have ignited street protests and demands for refunds from banks and brokerages. The city’s securities regulator has told seven of 19 banks under investigation for misconduct related to sales of the notes that they face possible sanctions, Martin Wheatley, the head of the agency, said June 23.

A total of HK$13.9 billion of the credit-linked notes were sold to Hong Kong individuals, according to the Securities and Futures Commission. BOC Hong Kong Holdings Ltd., Bank of East Asia Ltd. and Wing Hang Bank Ltd. are among lenders that sold the notes.

Sun Hung Kai Financial Ltd. and KGI Asia Ltd. have finished buying back notes they sold at prices equal to the principal invested, the SFC said yesterday. The two local brokerages are the only minibond vendors who have fully refunded investors, with Sun Hung Kai paying about HK$86 million and KGI about HK$1.5 million.

The securities watchdog is unlikely to accept the banks’ proposal, according to today’s Sing Tao report. The SFC is demanding that banks follow Sun Hung Kai and KGI and repay the full principal, Sing Tao said.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net