The two notes are part of the Pinnacle Notes Series of credit-linked notes, issued by Pinnacle Performance and arranged by Morgan Stanley Asia. -- PHOTO: ASSOCIATED PRESS
ABOUT 700 people here who invested a total of $26 million in complex structured products look certain to lose their entire stake.
The products - called Pinnacle Notes Series 9 and 10 - have been battered by the financial crisis and are likely to be wound up for little more than small change.
American Investment bank Morgan Stanley, which arranged the notes through its Asian unit, broke the bad news on its website on Friday.
An investor called The Straits Times on Friday morning after receiving an email from OCBC Securities saying: 'Terrible things have finally happened. Please help us! Get the MAS to intervene like how they did for Minibonds.'
Brokers DMG & Partners, Kim Eng Securities, OCBC Securities and UOB Kay Hian and lender Hong Leong Finance sold the notes here.
The portfolio of underlying assets in the two notes includes a rogue's gallery of failed or near bankrupt firms, including US mortgage giants Freddie Mac and Fannie Mae, Iceland's deathbed banks Kaupthing and Landsbanki and the now-bankrupt Lehman Brothers.
According to notices put up on Morgan Stanley's website, Standard & Poor's had slashed the ratings of the underlying assets of Series 9 and 10 from AA to CCC-.
The drastic downgrade was attributed to 'unprecedented events in the financial markets' and effectively signals that the investment products are now almost worthless.
The downgrade has also triggered a mandatory redemption event - industry-speak for a forced asset sell-off.
Investors will only get a 'pro-rata share' of the proceeds, but a notice on the Morgan Stanley website hints that noteholders are unlikely to get a cent.
'Given the current market values of the underlying assets ... we anticipate that investors will lose all of their original principal investment,' it said.
Rumours of the plummeting value of Series 9 and 10 have been circulating among investors here for weeks, sparked in part by the failures of similar products like Minibonds and DBS High Notes 5. These were both linked to the failed Lehman Brothers.
The two notes - part of a series of 16 - were not sold in Hong Kong, unlike Minibonds and DBS Constellation Notes.
They series were issued by Pinnacle Performance and arranged by Morgan Stanley Asia. Pinnacle Performance is a special purposed company incorporated in the Cayman Islands, but it is not a subsidiary of Morgan Stanley.
The Monetary Authority of Singapore (MAS) said on Friday night that it is in 'close contact' with Morgan Stanley Asia to ensure it provides all the necessary information on the early redemption of the notes.
It added that Morgan Stanley Asia has given assurances that it is finalising the appointment of an international accounting firm to assess the redemption process.
MAS has advised investors who believe they were mis-sold investments to file complaints with the institutions that sold the products.
Read the full story in Saturday's edition of The Straits Times.
