Morgan Stanley accused of ‘snobbery’ by Mike Ashley’s Frasers over $1bn margin call

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Mike Ashley’s Frasers Group has accused Morgan Stanley of “snobbery” over its choice to impose a $1bn margin call, claiming the financial institution’s transfer was pushed partly by the entrepreneur’s humble beginnings.

Appearing on the opening day of proceedings on the High Court in London, the billionaire mentioned Morgan Stanley sought to power the UK retailer out of a place it held in German model Hugo Boss and mentioned the demand for collateral was “completely unbelievable”.

“You might as well have said a nuclear bomb has landed in Slough,” Ashley advised the court docket on Wednesday.

Morgan Stanley hit again in its defence to the declare, alleging the London-listed retailer had “embarked on lawfare” towards it “on an extraordinary scale”.

Camilla Bingham KC, representing the US financial institution, mentioned that Frasers suffered “no loss” within the worth of its Hugo Boss positions and that its claims “are not grounded in any form of recognisable legal or factual reality”.

The dispute pertains to lengthy positions Frasers began to build up in Hugo Boss from 2019 by way of its dealer Saxo Bank, which in flip used Morgan Stanley to execute and clear the trades.

Morgan Stanley imposed a $1bn margin call “without warning” in May 2021, main Saxo Bank in flip to demand $900mn from Frasers.

Adrian Beltrami KC, representing Frasers, mentioned that senior insiders on the Wall Street financial institution had a “personal dislike” of Ashley, whom they thought to be an “upstart”.

He mentioned the margin call was “out of any proportion to any actual risk”. Instead, “the evidence regrettably suggests that MS’s erratic behaviour was at least partly the result of snobbery”.

Frasers needed to take “urgent action” to keep away from the “financial and reputational fallout of a forced close-out”.

The retailer is suing the financial institution for about €50mn. Ashley advised the court docket that the margin call was a “shock” that left him and colleagues at Frasers “drained”.

The positions have been in the end transferred by way of different establishments, led by HSBC, which Ashley mentioned was “instrumental in avoiding a disaster”.

Ashley began because the proprietor of a single sports activities store in Maidenhead in 1982 and went on to construct Frasers — which owns sportswear chain Sports Direct in addition to the eponymous division retailer chain — into a bunch valued at £3.7bn. He handed the reins of his retail empire to his son-in-law, Michael Murray, in 2022.

Ashley, the previous proprietor of Newcastle United Football Club, is among the many City’s most vibrant characters. He as soon as held a consuming competitors and vomited right into a pub hearth to “huge applause from his management team”, in response to a separate lawsuit he efficiently fought in 2017 over allegations he owed £14mn to a Merrill Lynch banker.

In the present litigation, Frasers mentioned Morgan Stanley rejected it as a consumer in April 2021 and alleged this was as a result of Simon Smith, world co-head of the funding banking division at Morgan Stanley, had “personal animus” in direction of him. 

Smith had “a visceral reaction” to the chance of working with Frasers and subsequently ensured the connection was terminated, in response to Frasers’ written submissions.  

Morgan Stanley mentioned in court docket paperwork that Frasers had superior “wild allegations of bad faith and irrationality”.

The financial institution mentioned it had not recognized who stood behind the trades when it made the margin call, including it was not Frasers’ dealer.

The financial institution mentioned it had utilized stress checks to what was a “large single stock concentrated short”. The issues had been highlighted by “short squeezes” in so-called meme shares.

Also of concern was the collapse of Archegos, from which it had suffered vital losses, Morgan Stanley mentioned.