‘Snobbish bank dropped nuclear bomb’ on my firm, claims Ashley
Retail magnate tells court that Morgan Stanley’s demand for $1 billion of collateral was class-driven
MIKE ASHLEY has accused Morgan Stanley of dropping a “nuclear bomb” on his business with a demand for $1billion (£790million) that he alleges was motivated by “snobbery”.
Lawyers for the retail billionaire accused the Wall Street investment bank of a “class-driven” decision when it attempted to force Mr Ashley’s company, Frasers Group, to abandon bets on the share price of Hugo Boss.
Giving evidence in the High Court, Mr Ashley branded the sudden demand for $1billion of collateral in May 2021 “completely unbelievable”.
The tycoon, who was chief executive of Frasers at the time, said: “You might as well have said a nuclear bomb landed in Slough – it couldn’t happen. You’re in total shock.”
Frasers Group alleges that the demand cost the retail empire millions of pounds. Morgan Stanley did not deal directly with Frasers.
The stock bets were at risk of being closed out using a process known as a margin call, when parties are asked to deposit extra cash to backstop investment positions.
The bank passed a margin call to Saxo Bank, which dealt with Frasers. Frasers is suing Morgan Stanley for about €47m (£40m) in alleged costs and lost trading profits it blames on the bank’s decision.
Adrian Beltrami KC, a lawyer for Frasers, claimed that Morgan Stanley changed the purpose of its $915m margin call on May 28 2021 after discovering that the retailer stood behind trades held by Saxo.
He told the High Court: “Even if legitimate when made, it was not legitimate when pursued.”
Frasers claims the cash call was capricious, in breach of market practice and designed to force the company to close or move its positions and cause it harm.
In court filings quoting bank staff, Frasers said Mr Ashley was viewed as an “upstart”, who would have “zero respect to the norms of the way in which we do business”. Frasers said Morgan Stanley’s negative reaction when Mr Ashley tried to become its client was “class-driven, no doubt about it”. Morgan Stanley, which dismisses the claim as contrived and without merit, argues it had no contractual relationship with Frasers, only with Saxo.
The New York-based lender says the margin call, based on a potential 400 per cent rise in Hugo Boss shares, was designed to ensure it was protected from exposure to stock market bets.
Camilla Bingham KC, Morgan Stanley’s lawyer, said: “Everything else is noise and smoke screen for the truth.”
She also argued that not even paranoid readers of the court documents could detect a sense of “snootiness” from the Wall Street titan.
Frasers said it “avoided the worst” of the potential consequences from Morgan Stanley’s behaviour after obtaining a court injunction to prevent the bank closing out the Hugo Boss trades. These were later transferred from Morgan Stanley to rival bank HSBC.
Mr Ashley said the phone call from HSBC confirming the move was “the most remarkable phone call of my entire working business life”.
He said: “No one had ever saved me before or since in the way that HSBC did. They were so instrumental in avoiding a disaster it’s beyond words. I wouldn’t have given myself a snowball’s chance in hell of them saying yes.”
The 59-year-old said building a large stake in Hugo Boss allowed Frasers to “really look under the bonnet” of the German designer brand.
However, Frasers argues that it was “frozen” out of further trades in Hugo Boss stock as a result of Morgan Stanley’s margin call.