MORE THAN 130 investors, including two congregations of nuns and the Irish Veterinary Beneficiary Fund, who are seeking up to €30 million in compensation and damages, have reached a provisional agreement with Morgan Stanley and two other financial institutions, the High Court in London was told yesterday.
The Holy Faith Sisters, based in Dublin, and the Sisters of Charity of Jesus and Mary, based in Hertfordshire, England, and more than 80 other investors launched the legal action in August 2010, to be joined later by 50 more investors.
They had bought “hybrid structured euro constant maturity swap notes” secured by bonds issued by Dresdner Bank through Bloxham stockbrokers in Dublin, which has since been put into liquidation.
They claimed they lost more than €20 million, money they are now seeking back from Morgan Stanley Co International, Morgan Stanley Capital Services, Saturns Investments Europe and Deutsche Trustee Company Ltd, alongside €10 million in damages.
Saturns, they alleged, with the knowledge and co-operation of the Morgan Stanley companies, “deliberately or carelessly” did not redeem the notes when a mandatory redemption was triggered.
This took place in January 2009 when the underlying bonds created by Dresdner Bonds were downgraded by Standard Poors to BBB- grade, or below.
The investors alleged the notes were redeemed six months later when the value had risen substantially, leading to a €10 million profit for Morgan Stanley.
Lawyers for the Morgan Stanley companies, Saturns and Deutsche Trustees, told Mr Justice Walker a provisional agreement had been reached with the investors, but further time was needed to resolve the terms of the settlement.
However talks between Morgan Stanley and Bloxham have not reached a resolution, counsel for the investors told the judge.
Even if a settlement is agreed with the investors, the dispute between Morgan Stanley – which argues that it had no dealing with the noteholders since it sold the notes to Bloxham – and the Dublin firm will remain outstanding.
Bloxham appointed a provisional liquidator at the end of May after the Central Bank ordered it to suspend operations after accounting irregularities overstated its capital by €5 million.
Some of the investors bought relatively small amounts of the notes below the minimum threshold of €30,000 set by Morgan Stanley when Bloxham aggregated their purchase bids.
Bloxham has issued a counter-claim against Morgan Stanley for alleged breach of contract and losses arising from having been exposed to claims by its clients.
