Published May 6, 2009

Lehman unit in S'pore has holdings of US$300m

Interested minibond investors must lodge claim by June 1

By JAMIE LEE

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A SINGAPORE-BASED Lehman Brothers entity has holdings of nearly US$300 million as at March 31 that minibond investors could try claiming if they choose to pursue this action against the failed US investment bank.

However, investors must have a proof of claim against Lehman Brothers Inc (LBI) - the only Lehman entity that investors can deem as a debtor under the US's Securities Investor Protection Act (SIPA) liquidation proceeding - before they take up the case.

LBI is in liquidation in the United States.

As it is the arranger of the structured products - such as being in charge of drafting the prospectus - investors must prove that the information provided in such documents was misleading, lawyer Siraj Omar told an investors' forum organised by the Securities Investors Association of Singapore (SIAS) yesterday.

The amount of assets was revealed by the Monetary Authority of Singapore (MAS) yesterday.

MAS said that as at end-March, Lehman Brothers Pte Ltd - which holds funds on behalf of LBI - had about US$144.7 million in segregated house accounts and US$153.6 million in segregated client accounts.

Another Singapore-incorporated entity, Lehman Brothers Singapore Pte Ltd, had a net cash position of S$61.6 million as at end-March but it does not hold funds for LBI.

The central bank said it released the information after discussions with SIAS, but said it was not rooting for investors to take legal action against the arranger.

'MAS is not providing legal advice to investors, and in releasing this information in the public interest is not in any way suggesting that legal action is in their best interests,' it said in a press statement. 'That is a matter for investors to take independent advice on, having regard to their own particular circumstances.'

With the SIPA, creditors who believe they have a proof of claim against LBI must lodge it with the US trustee, James W Giddens, by June 1, 2009.

Mr Siraj stressed that investors must have a basis for entitlements to get their investments back. If so, investors can choose then to make a claim in the US and join the pool of creditors.

But Mr Omar noted that minibond investors would be the last on the list of creditors that can have a share of the assets because they are ranked behind secured and preferred creditors.

Investors can also file a lawsuit in Singapore as provisions under the Companies Act can, under certain circumstances, allow locally held assets of a foreign firm to be paid off to local creditors first, he added. This is done by ring-fencing the assets.

Referring to the information released about the Lehman assets held in Singapore, SIAS president David Gerald told the 100-odd forum participants: 'I don't want to raise your hopes, but you need to make an informed decision.'

K H Lau, whose wife was a minibond investor, wasn't optimistic. 'If experts say the prospectus is water-tight, what chance does retail investors have (against LBI)?' he told BT.