Shin Corp exec chairman says Temasek never indicated that it wanted to hold investment forever

 

By LEE U-WEN

 

TEMASEK Holdings could divest its stake in Shin Corp if the right buyer comes along, said the Thai telecommunications giant's executive chairman and acting president Somprasong Boonyachai.

 

CLEARING THE AIR Mr Somprasong said that he had spoken with Temasek's executives to discuss the fallout of the Thaksin verdict and the potential impact on Shin and its affiliate companies such as its mobile flagship firm Advanced Info Service

By contrast, GIC's remaining stake in Citi shows a paper profit of US$500m

 

By CONRAD TAN

 

THE Government of Singapore Investment Corp's (GIC) 11 billion Swiss franc investment in UBS bonds is showing a paper loss of over five billion francs after the bonds converted into ordinary shares when they matured yesterday, giving GIC a 6.6 per cent stake in the Swiss bank.

 

'GIC can confirm that the notes have been converted into ordinary shares,' GIC spokesman Jennifer Lewis said.

GIC declined to provide further details, but a regulatory filing it made in the United States last month - where UBS is also listed - shows that GIC would have received 230,704,697 ordinary UBS shares in exchange for its original investment of 11 billion francs in mandatory convertible notes issued by UBS in March 2008.

UBS shares were trading at 16.14 francs at noon yesterday in Zurich. At that price, the shares now held by GIC would be worth just 3.72 billion francs, or about 7.28 billion francs less than its original investment of 11 billion francs.

Including the two yearly coupons of 9 per cent, or 990 million francs each, that GIC would have received over the two-year term of the UBS notes, GIC's paper loss at that share price would be 5.3 billion francs.

BT's calculations show that UBS's share price would have to reach 39.1 francs for GIC to break even on its original investment in the bank.

By contrast, GIC's investment in Citigroup has fared better - because the bank was forced to offer GIC and other preferred shareholders highly favourable terms to persuade them to convert their preferred shares into common equity.

At Thursday's closing price of US$3.43 for Citi shares in New York, GIC's remaining stake in Citi is showing a paper profit of some US$500 million, according to BT calculations based on figures made public by GIC earlier. That's on top of a US$1.6 billion profit that GIC pocketed after it sold off about half its shares in the bank last year.

In February last year, GIC agreed to exchange its US$6.88 billion worth of preferred shares in Citi into common shares at US$3.25 each, or about 2.12 billion common shares in total, as part of a sweeping recapitalisation plan by Citi to boost the proportion of common equity in its capital buffer.

That share swop was completed in September, giving GIC a stake of 9.4 per cent in Citi - more than GIC had intended to hold when it first invested in the bank in January 2008. Shortly after the swop, GIC sold about half of its Citi shares in the market, equivalent to a 4.5 per cent stake, netting a profit of US$1.6 billion on the sale, and leaving it with a 4.9 per cent stake in Citi.

After adjusting for the dividends that GIC received on its preferred shares before the swop, the average cost of acquiring the common shares was just US$2.95 a share, GIC group chief investment officer Ng Kok Song said in September.

That stake was later diluted to about 4 per cent in December, when Citi had to raise another US$20.5 billion in new capital.

Based on the average cost per share of US$2.95, GIC's remaining stake in Citi is still showing a paper profit of about US$500 million.