(Bloomberg) - Morgan Stanley and two of its top distressed-debt traders are being sued by Italian ferry operator Moby SpA, which claims it has recordings showing the bank and an investor were secretly trying to seize control of the company away from other creditors.
The lawsuit, filed Tuesday in New York, describes recordings allegedly made by an investigative firm of an investor who said he was in a secret alliance with traders Massimo Piazzi and Hillel Drazin. Moby, which seeks to restructure its debt to avoid liquidation, said the defendants used non-public information to acquire more of the company’s bonds.
Morgan Stanley hid its ownership of 10% of the company’s bonds while working with Antonello Di Meo, a former employee of Sound Point Capital Management, to foil Moby’s restructuring plan, according to the complaint. Di Meo discussed his ties to Morgan Stanley in disguising the bank’s bond purchases, Moby said.
“They are a market maker, they cannot be seen by hedge fund clients as siding with one,” Di Meo said, according to the complaint. “I’m being very thoughtful and careful when it comes to the involvement of Morgan Stanley because they cannot, at this point in time, publicly say, ‘We are supporting him.”’
The bank “even went so far as instructing a notary in London to certify that Di Meo controls 26% of the notes, inclusive of its stake,” Moby said in the lawsuit.
Morgan Stanley didn’t immediately respond to requests for comment. Di Meo said he wasn’t aware of the lawsuit and declined to comment.
Piazzi leads the global distressed-debt business at the bank, while Drazin is head of the special situations group for Europe, the Middle East and Africa, according to the complaint, which said both are managing directors. Piazzi and Drazin didn’t respond to calls and emails seeking comment.
Moby claims Di Meo improperly interfered with the company’s business relationships with creditors. It claims that Di Meo, Morgan Stanley, Piazzi and Drazin engaged in racketeering.
“My partner at Morgan Stanley, as Antonello [Di Meo] mentioned, Massimo Piazzi, is also a very close friend of Antonello’s,” Drazin is alleged to have said in one of the recorded conversations. “You know, we’re in this situation, we are a capital partner behind Antonello’s, you know, orchestration of the process. And our intent is to remain.”
Bankruptcy Plan
Moby seeks a court order barring the defendants from buying or selling Moby debt or assets or interfering with its restructuring. On Tuesday, the judge set an Oct. 5 hearing date on the request.
The company intends to seek Chapter 15 bankruptcy protection in the U.S., it said.
Moby, which runs routes between the Italian mainland and islands such as Sardinia, has been under pressure from increasing regulation, tougher competition and weak freight traffic volumes. In June 2020, the company petitioned the Bankruptcy Court in Milan for a court-supervised restructuring procedure, but its revenue grew above expectations this summer.
In February, the company filed a lawsuit in the U.S. against a broader group of bondholders, including Sound Point, Cheyne Capital Management and BlueBay Asset Management, which “unlawfully” sought to take control of the firm, Moby claimed at the time.
It later discontinued the suit and started negotiating with creditors, reaching a restructuring deal last week with a group representing more than a third of the investors. The ferry operator now needs a majority of them to approve the restructuring plan in a meeting scheduled on Dec. 13.
In the new filing, Moby claims that Di Meo has been seeking to join forces with Piazzi to block the restructuring plan in court.
Moby’s law firm, Quinn Emanuel Urquhart & Sullivan, hired the investigative firm that made the recordings, according to the complaint. A Quinn Emanuel attorney declined to comment.
The case is Moby SpA v. Morgan Stanley, 21-cv-8031, U.S. District Court, Southern District of New York (Manhattan).
(Adds hearing date in 10th paragraph)
By David Voreacos, Sridhar Natarajan and Luca Casiraghi
