Singapore: Morgan Stanley has said that $26 million Singapore dollars ($17.2 million) of notes that are linked to the bankrupt brokerage Lehman Brothers Holdings Inc are now worth nothing.

Known as Pinnacle Notes Series 9 and 10, the notes are subject to a mandatory early redemption on account of "credit events" that occurred in at least five of the notes' underlying assets, which include Lehman Brothers, the two US mortgage companies Fannie Mae and Freddie Mac, and another two Iceland banks, Kaupthing and Landsbanki.

Morgan Stanley said the underlying assets will be sold, and the notes will be redeemed within four to six weeks. The notes' underlying assets were synthetic collateralised debt obligation securities (CDOs), which the rating firm Standard & Poor's (S&P) recently rated as ''junk'', revising its rating to CCC- from the earlier rating of investment grade AA when the notes were sold last year. Morgan Stanley Asia had arranged the notes, which were sold to around 700 investors by five Singaporean brokerages, namely DMG & Partners Securities, Hong Leong Finance, Kim Eng Securities, OCBC Securities and UOB Kay Hian.

Given the current values of the underlying assets and credit default swap transaction, ''we anticipate that investors will lose all of their original principal investment," Morgan Stanley said in a statement on its website.The Pinnacle series was issued by Pinnacle Performance, and was arranged by Morgan Stanley Asia. Pinnacle Performance is a special purpose company incorporated in the Cayman Islands, and is not a subsidiary of Morgan Stanley.

Last month, Singapore's DBS Group had said that around $68 million of notes linked to Lehman Brothers were worthless, which were part of $239 million of notes the bank sold to about 4,700 clients in Singapore and Hong Kong. Last week, it announced that it would pay around $47 million as compensation to investors who were the recipients of poor service.
Around 700 people in Singapore, who had cumulatively invested $26 million in Pinnacle notes would now lose their money.