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@ visit http://www.ifre.comproviders to include Chinese
BONDSûINûITSûmAGSHIPûINDEX
The move is subject to further
improvements in the Chinese
market, including changes to
the settlement, block trade and
tax collection policies.
PANDA PREVIEW
Pan also gave some details of the
long-awaited Panda bond rules
FORûTHEûlRSTûTIMEû5NDERûTHEû
forthcoming guidelines, issuers
would be able to decide whether
to use the proceeds onshore or
offshore, Pan said.
He said Panda bonds issued by
OVERSEASûlNANCIALûINSTITUTIONSû
will be reviewed by the PBoC,
while offerings from sovereign
issuers and corporate issuers
will be overseen by the National
Association of Financial Market
Institutional Investors, a self-
regulatory body under the PBoC.
Pan said the PBoC will
support international rating
agencies to rate Panda bonds.
The rules will also stipulate
requirements for accounting
standards and a broader array of
AUDITINGûlRMSûWILLûBEûELIGIBLEûTOû
vet Panda bond documentation.
He did not elaborate on this
point.
The outlines are broadly in
line with existing practices on
Panda bonds, but market
participants are not optimistic
THATûTHEûlNALûRULESûWILLûBEû
published soon, as they have
been waiting for more clarity
for years.
An underwriter specialising
INû0ANDAûBONDSûSAIDûTHEûlNALû
formulation of the rules had
been complicated by the
fragmented regulatory regime.
In February, the NAFMII, the
main regulator for corporate
bonds in the interbank market,
granted initial approval to the
new rules on corporate Panda
bonds, moving the rulebook
into the last leg before
publication.
Since then, however, there has
been no further announcement.
Sources say the delay is partly
due to concerns that the
exchange-traded bond market,
the smaller of China’s two bond
markets, should also be includedin the new regime. (^)
not removed investors have
successfully increased the
amount by which an issuer needs
to delever in order to access the
portability clause,” Gundy said.
This year, Spanish gaming
company Cirsa and Italian
PACKAGINGûlRMû&EDRIGONIûHADûTOû
remove portability clauses from
their deals backing buyouts by
Blackstone and Bain Capital, while
"AIN
OWNEDû)TALIANûPAYMENTSûlRMû
Nexi and KKR-owned Netherlands-
listed vending machines operator
Selecta had to tighten the leverage
level at which they can exercise
portability.
Most recently, CBR Fashion
exercised portability when it was
acquired by Alteri Investors in
-ARCHû)TûISSUEDûõMûOFûû
senior secured 2022 notes in
October. Other names that have
exercised portability are frozen
foods maker Iglo, when it was
acquired by peer Nomad Foods,
and auto parts maker Autodis,
when it was acquired by Bain
Capital. Both took place in 2015.
“In my view, portability is
completely outrageous as a
concept,” said one senior
banker.
“In your credit analysis, you
need to think about management,
ownership and the current
owners’ strategy; that’s part of
your investment thesis. Portability
tells you that you can change
management, you can change
ownership, but you get no say if
some criteria are met. Frankly, this
is an abuse of the level of
competition we have in Europe.”
If Radisson is sold, it will
come as a key warning sign for
European high-yield investors,
whose complacency around
portability clauses is in stark
contrast to the US.
“Portability is not accepted in
the US, but our market has
accepted it. Maybe it’s about
time that you have an example
of why you might not want to
SACRIlCEûTHATûPROTECTION vûSAIDû
the investor who participated in
the Radisson deal.
Still, investors said a change
of ownership would be credit-
positive, given the noise around
HNA.
Final payday for Lehman’s
European claimants
People & Markets Hedge funds sitting on sevenfold return
BY CHRISTOPHER SPINK
A landmark will be reached later
this month when creditors of
Lehman Brothers’ European arm
lNALLYûRECEIVEûaBNûOFûINTERESTû
that has built up on their
aBNûOFûORIGINALûCLAIMSûOVERû
the nearly 10 years since the
investment bank failed.
The original claims have
already been paid back in full.
The High Court of England
and Wales approved the
repayment scheme proposed by
PwC for the interest on June 20.
PwC is the joint administrator of
Lehman Brothers (International)
Europe.
And last Tuesday, the joint
administrators said the surplus
would be paid on July 25,
bringing to a close a lengthy
AND ûFORûSOME ûHIGHLYûPROlTABLEû
process.
Russell Downs, joint
administrator and partner at
PwC, called this an “exceptional
outcome for stakeholders”
CONSIDERINGûTHATûONûTHEûlRMSû
appointment there were
hINSUFlCIENTûFUNDSûTOûPAYûTHEû
staff’s wages” and no access “to
critical systems to identify the
company’s assets and liabilities”.
Distressed investors that
swum against the crowd and
bought up various creditor
claims against Lehman Brothers
and its various subsidiaries,
including its main London entity,
LBIE, have done very well.
So far, LBIE creditors have
been paid in full, meaning those
individuals that bought the
claims, reportedly in some cases
for as little as 20p in the pound,
HAVEûALREADYûGOTûBACKûlVEûTIMESû
that initial investment.
Now holders, including Elliott
Management and King Street
Capital Management, can expect
to receive at least an additional
PûINûTHEûPOUNDûAFTERûTHEû(IGHû
Court’s ruling.
4HATûWILLûGIVEûTHEMûPûBACKû
overall, or up to seven times
their money.
By comparison, investors that
bought into JP Morgan shares
the week after Lehman Brothers
collapsed (when they were
TRADINGûAROUNDû53ûAûPIECE û
would have a return of some
two-and-a-half times (they were
TRADINGûAROUNDû53ûLASTû
week).
Last year, the UK Supreme
#OURTûRULEDûTHATûTHEûaBNûOFû
cash and other assets that had
built up on top of the original
aBNûOFûCLAIMSûSHOULDûlRSTûBEû
USEDûTOûPAYûaBNûOFûINTERESTûTHATû
had accrued (at 8% per year) on
those claims before any excess
could be paid to subordinated
noteholders.
The latter are the next most
senior class of creditor that
stand to be paid out after the
general claims, with associated
interest, are returned in full.
In return for dropping some
outstanding litigation that
sought to give certain creditors a
higher rate of return, these
SPECIlCûCLAIMANTSûWILLûBEûGIVENû
an additional 2.5% on top of the
value of their claims.
This litigation about the
“waterfall” of payments could
have delayed payouts until 2020.
“The UK Court has now
approved LBIE’s scheme of
arrangement, which enables the
waterfall litigation to be
concluded. This paves the way
for a distribution of more than
aBNûTOûUNSECUREDûCREDITORSûINû
July,” said Downs.
That will still leave a further
aBNûORûSOûEARMARKEDûFORûTHEû
subordinated bondholders and
others. “The remaining surplus
may be distributed in due course
TOûOTHERûSTAKEHOLDERSûONCEûlNALû
recoveries are made and
reserves for dedicated liabilities
are resolved,” said Downs. (^)
“This paves the way for
a distribution of more
than £6bn”