Published May 8, 2009

Minibond investors can't touch Lehman units: lawyer

By SIOW LI SEN

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MINIBOND investors are unlikely to get money that is sitting in Singapore accounts belonging to the bankrupt Lehman Brothers Inc (LBI), said a lawyer.

Conrad Campos, who is acting for Minibond Investors Action Group, said that some investors are confused after being told of the several hundred millions of dollars in three Lehman entities.

The group, which bands together over 300 investors, is considering taking action against the distributors in Singapore which sold them the Minibonds. Another course is making a claim against the trustee.

Earlier this week, the Monetary Authority of Singapore said that as at end-March, Lehman Brothers Pte Ltd (LBPT) - 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.

Mr Campos said that Minibond investors here have to understand that once investors lodge a claim with the bankruptcy trustee or US bankruptcy courts, they will be submitting to the jurisdiction of the US courts. 'In that event, the investor would also be implicitly accepting that the assets of LBPL in Singapore should be made available to the common pool for distribution to creditors of LBI in accordance with US insolvency law,' he said.

The claim is likely to be contested and it will be costly to mount legal action in the US.

Investors also cannot launch legal proceedings in the US and concurrently launch legal action in Singapore as such a double claim will be dismissed, he said.

In addition, investors here cannot 'ring fence' the money in these accounts for themselves, he said. That's just not how bankruptcy proceedings work. Also,'we also don't know what the liabilities are', he said.

'The information released . . . that there is approximately US$298.3 million standing to the account of LBI in Singapore is neither here nor there because what is material for the purpose of deciding whether to lodge a claim with the bankruptcy trustee in the US is whether there are net assets (after deducting for liabilities) of the total bankrupt estate available for distribution to all creditors,' he said.

It is also his opinion that the bankruptcy trustee who has extra-territorial power does not need the Singapore court's permission to move the money in these accounts.

Pat Lung, a member of the group, said that Minibond investors should understand that the money in these Singapore accounts does not belong to them even though they are here.

Also, investors are not creditors and would be ranked last in priority of claims and 'you're sharing on a worldwide basis whatever that's left', he said.

Mr Lung said that his wife had invested $400,000 in Minibonds.