Nuns’ €16m bond sale action nears settlement

An investment bank is close to a settlement with two groups of nuns, an Irish charity for veterinarians and more than 100 private investors who say they lost €16m in a bond sale.

Andrew Sutcliffe, counsel for the private investors, told the High Court in London that a settlement is close to being reached by the 129 investors — most of whom lived or were based in Ireland — who said Morgan Stanley failed to sell notes soon enough after they were downgraded.

The Sisters of Charity of Jesus and Mary, the Holy Faith Sisters, based in Glasnevin, Dublin, the Irish Veterinary Benevolent Fund, and individual investors sued Morgan Stanley and Saturns Investments Europe, a special-purpose vehicle set up by the New York-based bank, in 2010.

The investors bought the bonds in 2005 through the Irish stock brokers Bloxham, which has since been liquidated. Morgan Stanley and Saturns waited until Jun 2009, after the price of the underlying bonds had risen significantly, to redeem the notes, investors said.

Morgan Stanley “deliberately or carelessly did not redeem the notes when a mandatory redemption was triggered,” according to court documents. Investors lost more than €16m as a result and Morgan Stanley made more than €10m, the investors said.

The lawsuit is “speculative and without merit,” Morgan Stanley and the other defendants said in court documents.

Laurence Rabinowitz, counsel for Morgan Stanley, told Mr Justice Walker: “It is likely this matter will be disposed of.”

A further hearing is expected in the near future.

Bloxham appointed a provisional liquidator at the end of May after it suspended operations amid an unrelated probe by the Central Bank into accounting irregularities.