The Pinnacle Notes is a structured product that was issued by Morgan Stanley. Investors who have bought any of the Pinnacle Series might want to note the following:
- Investors will continue to receive their coupons from all Pinnacle Notes Series as the structures are still intact.
- Last Friday, there was a low buyback price being quoted because of market conditions and Morgan Stanley were expecting a huge number of redemptions (which did not happen). The upcoming valuation should see an improvement as credit market would likely have improved as well.
- With respect to the CDO portfolio, there are currently three defaults – Lehman Brothers, Fannie Mae and Freddie Mac. (I’m not too sure whether they are in all the Series). Depending on the recovery rate, the CDO portfolio can probably take 6 – 8 credit defaults.
- To that effect, investors will be receiving an update on their Pinnacle Notes with respect to the number of defaults on the CDO portfolio.
- With the status of Morgan Stanley changing to a bank holding company (making it a commercial bank and allowing it to receive deposits), it will be in a position to strengthen its financial position. This will reduce the swap counterparty credit risk.