Morgan Stanley said it settled lawsuits brought by investors in two structured investment vehicles called Cheyne and Rhinebridge.
The investors, led by Abu Dhabi Commercial Bank and King County, Washington, also agreed to drop their claims against Moody’s Investors Service Inc. and Standard & Poor’s, the world’s largest provider of credit ratings owned by New York-based McGraw-Hill Cos., the investors said in a notice filed yesterday in federal court in Manhattan.
The plaintiffs claimed the defendants gave the vehicles inflated ratings in two separate suits filed in federal court in Manhattan in 2008 and 2009. The rating companies worked with Morgan Stanley to structure the notes, and their compensation was based on the notes receiving the desired ratings, the plaintiffs claimed.
The investors said Morgan Stanley was negligent in conveying ratings that it should have known were inaccurate.
A trial in the Abu Dhabi case had been scheduled to begin before U.S. District Judge Shira Scheindlin on May 6, according to court records.
“We’re pleased to have settled these cases,” said Mark Lake, a spokesman for Morgan Stanley. Lake declined to provide any details of the settlements.
“McGraw-Hill has settled the Abu Dhabi and King County cases without any admission of liability or wrongdoing,” said Jason Feuchtwanger, a spokesman for McGraw-Hill. “The terms of the settlement are confidential.”
“This settlement allows us to put the significant legal defense and related costs, as well as the distraction, of these very protracted litigations behind us,” Michael Adler, a Moody’s spokesman, said in a statement yesterday. “We are satisfied that it is in the best interests of our company and shareholders.”
Samuel Rudman, who represents the investors in both lawsuits, didn’t immediately return a call yesterday seeking comment on the settlement.
The cases are King County, Washington v. Morgan Stanley, 09-cv-08387; Abu Dhabi Commercial Bank v. Morgan Stanley & Co., 08-cv-07508, U.S. District Court, Southern District of New York (Manhattan).