Sixteen Hong Kong banks have agreed on a joint proposal that could see investors in Lehman Brothers minibonds recover most of their original investments.
As a final settlement, the banks yesterday offered to pay back up to 96.5 per cent of the defunct investments - up from 60 per cent in 2009. But this will only go ahead if at least 75 per cent of an estimated 31,000 investors agree to it.
The retail investors bought 24 tranches of minibond products - a type of derivatives rather than real bonds - through the local banks before the Western financial crisis brought down Lehman, one of Wall Street's most prominent investment banks, in September 2008.
Investors can also receive an 'ex-gratia' payment - which the banks have no legal obligation to pay - if they agree not to pursue their cases any further.
'The banks have shown their best sincerity in resolving the issue. We believe investors will support [the proposal],' said He Guangbei, chairman of the Hong Kong Association of Banks and chief executive of Bank of China (Hong Kong).
By initial estimates, roughly two-thirds of the investors could recover about 80 per cent to 90 per cent of their principal investment, while 31 per cent could get back about 70 per cent to 80 per cent. But with the ex-gratia payment, many may get back as much as 96.5 per cent of their initial investment, He said.