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SINGAPORE : The Series 5 and 6 of the Lehman Minibond programme are almost certain to default when a 15-day grace period for coupon payment expires just before midnight on Tuesday.
The Monetary Authority of Singapore (MAS) said no payment has been received for the two series.
The trustee for the programme, HSBC Institutional Trust Services, will consider proposals for a new swap counterparty to replace Lehman Brothers for all series of the programme.
The central bank said 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 will commence selling the underlying securities and use the proceeds to pay noteholders after deducting any other liabilities.
MAS said it expects 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.
MAS advises investors to refer to the trustee's website for updates from October 8. - CNA /ls
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