HONG KONG bondholders seem to have changed their minds about who to blame for the fall in the value of their HKR International convertible bonds (CBs).
The CBs have lost lustre in bondholders' eyes as a result of HKR International's plan to issue a $2.4 billion special dividend of bonds and warrants to holders of its shares.
The value of the CBs plummeted by almost 30 per cent as the market priced in the windfall to shareholders. As a result, CB-holders will probably scramble to convert their bonds into shares so they can benefit from HKR's largesse, suddenly creating about 39 million new shares and forcing down HKR's share price in the process.
One investment bank has already downgraded it two notches and says there will be a management discount factor on HKR as a result of the dispute with bondholders.
Last week at least one big investor in the bonds warned that HKR's name would be besmirched by the move and even threatened possible legal action.
Some bondholders said they had not been informed by HKR of the move.