Nuns sue investment bank over bonds collapse
Two religious orders are among a group of 88 investors who are taking legal proceedings against the London-based investment bank Morgan Stanley.
The Sisters of Charity of Jesus and Mary in Letchworth in the UK and the Holy Faith Sisters in Dublin launched the €6 million legal action against the investment bank in a dispute over bonds they purchased through Bloxham Stockbrokers, the value of which collapsed by 97 percent.
The legal action, titled “The Sisters of Jesus and Mary versus Morgan Stanley” relates to investments bonds sold by Bloxham Stockbrokers to clients.
The Sisters of Charity of Jesus and Mary, the Holy Faith Sisters, the University College Dublin-based Irish Veterinary Benevolent Fund and more than 80 other Irish investors have joined forces to sue the US investment bank.
Teh bank made a profit of almost €2 billion in the past three months, according to documents filed in the High Court in London.
Meanwhile, the value of the so-called Saturn Investment Europe bonds collapsed and are almost worthless.
The nuns taking the action allege that between January 2005 to December 2006, they were convinced to buy €5.87m worth of “so-called Hybrid Structured euro constant maturity swap notes” with guaranteed steady returns of 6.25 percent a year for four years.
They claim Morgan Stanley contractually assured them the bonds would be sold immediately if downgraded to a certain level. Deutsche Bank was the custodian of the deal.
However, when downgraded to junk by Standard & Poor’s in January last year the bonds were not sold for five months.
Instead of fulfilling its alleged promise, Morgan Stanley waited five months before selling the bonds, according to the claimants.
The bank allegedly made US$11.2m in the delay.
By then, the bonds were worth a fraction of what the nuns had paid.
The two groups of nuns, who together invested €500,000, and other investors are looking for the return of €5.87m invested along with some compensation.
Their case is being handled by London-based solicitors Stewarts Law.
The case is expected to be heard sometime next year.