Credit default of Pinnacle Notes Series 9

Dear Mr. Tan,

We were notified by Elgin Ting of OCBC securities that redemption event may shortly occur for Pinnacle Notes Series 9 as a result of credit events. This is urgent and of paramount importance for those who are exposed to it.

Before allowing the redemption to happen, can MAS, SIAS or other professional bodies help look into the matter instead of letting the arranger (Morgan Stanley) call the shot? Can it be saved?

I'm befuddled by the horrendous risk factors stated in the letter relating to Synthetic CDO Securities, CDO Squared Securities, Credit Commodity linked Securities and Asset Backed Securities. Please help post this in your blog.

S8Neo

REPLY
You can oranise a collective letter to be sent to MAS, if you wish.

Before you do so, you can check the facts. I believe that a credit event occurs when a certain number of the underlying assets have failed - in accordance with a key term of the structured product.

When this happens, the total amount invested is used to pay the counter-party of the credit default swap. This is like paying an insurance claim - when the insured event occurs. In this case, the investors of the structured product is the insurer of the event and the swap counter-party is the recipient of the payment.

Many investors are shocked that they are exposed to this type of risk - which they were not propertly informed at the time of their investment. In additional, they were also exposed to the risk of default of any of several reference entity.

These types of risks apply to all the other "credit linked notes" as well. Some have failed now. The others may face the same outcome later. If they are likely, they may avoid a credit event.