Lehman launches more minibonds in Hong Kong

Lehman Brothers has launched retail minibonds linked to the credit of Hong Kong conglomerate Hutchison Whampoa today, making it the fourth time the bank has launched such a product in the Hong Kong Special Administrative Region.

The notes will be issued through a special-purpose vehicle called Pacific International Finance and offer investors a fixed rate coupon of 3.8% paid twice a year. Denominated in US dollars, the minibonds mature in two years, with investors having the option to extend the term for an additional five years.

“People have money in their bank account that is not working for them, they’re getting minimal interest rates - almost nothing. But at the same time they don’t want to take on a lot of risk,” said Christophe Lee, chief executive of SHK Fund Management, a unit of Hong Kong conglomerate Sun Hung Kai, who is co-ordinating distributor of the minibonds. “So [here] you have a credit that people are very comfortable with and which pays very reasonable coupon - a lot more reasonable than what they get in the bank anyway.”

Lehman Brothers first launched retail minibonds linked to the credit of Hutchison, denominated in Hong Kong dollars, in May last year, later issuing two other series of the minibonds denominated in US dollars in January and February this year – both of which had to be increased from an initial issue size of $50 million to $80 million and $60 million, respectively.

Lee added that no date had been set for the launch of retail minibonds linked to credits in the S&P 100 index, also arranged by Lehman Brothers, which were scheduled for launch at the end of May but postponed due to the outbreak of atypical pneumonia in the city.

Hutchison Whampoa is one of the largest companies listed on the Hong Kong Stock Exchange operating and investing in five core businesses including ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure.