Pinnacle Notes Series 1 forms part of a collection of credit-linked notes issued by Pinnacle Performance and arranged by Morgan Stanley Asia. -- PHOTO: REUTERS
THE ongoing structured notes saga has deepened with Morgan Stanley's Pinnacle Notes Series 1 becoming the latest to come under the spotlight.
GRIM OUTLOOK
'Despite the recent market rally, the value of the notes should have fallen very substantially because the debt of some companies that they are linked to has plummeted in value.'
The complicated Pinnacle products do not appear to have any link to the now-bankrupt Lehman Brothers. Unlike the well-publicised Minibonds, they were not issued by Lehman Brothers and do not count the failed United States bank among the main 'reference' firms that could trigger a 'credit event'.
The Monetary Authority of Singapore (MAS) said on Wednesday that Morgan Stanley had informed it and the distributors of the notes that 'credit events' - this could involve, for instance, bankruptcy or the failure to pay - have occurred in relation to the securities underlying the notes.
The triggering of the credit events has led to drops in the value of the Pinnacle Series 1 notes, The Straits Times understands.
Morgan Stanley on Wednesday declined to disclose how much they had fallen.
Pinnacle Notes Series 1 forms part of a collection of credit-linked notes issued by Pinnacle Performance and arranged by Morgan Stanley Asia.
Already, Pinnacle Notes Series 9 and 10 are said to have seen their values plunge to near zero.
Pinnacle Notes Series 1 was sold to 342 retail investors who paid around $11.4 million for the complex product. A total of about $14.7 million was invested in it.
Main distributors were Maybank, OCBC Securities, CIMB-GK, Phillip Securities, Kim Eng Securities and DMG and Partner Securities, the central bank said yesterday.
MAS said it was informed by Morgan Stanley that while credit events have occurred in relation to the underlying securities, there has not been a 'mandatory redemption event'.
