Uploaded June 2025 | Updated September 2026, 2 weeks ago
Get more case briefs explained with Quimbee. Quimbee has over 42,700 case briefs (and counting) keyed to 988 casebooks ► quimbee.com/case-briefs-overview
[Here is where the case name and citation will go]
A debenture is a long term unsecured bond or promissory note generally issued by a corporation backed by the issuer's creditworthiness instead of collateral.
Debentures often have a clause restricting the issuer's ability to redeem them before they mature.
In Morgan Stanley versus Archer Daniels Midland, the court interpreted one such clause. In nineteen eighty one, Archer Daniels Midland issued more than one hundred million dollars in debentures set to mature in two thousand eleven.
In nineteen eighty three, Morgan Stanley purchased approximately sixteen million dollars of these debentures.
At that time, the debentures were trading for more than their redemption price. The debentures contained a clause prohibiting Archer from redeeming them, them, quote, from the proceeds or in anticipation of the issuance of any indebtedness, unquote, if the interest rate for such debt was lower than sixteen point o eight percent a year. The prospectus and indenture under which the debentures were issued contained the same language, which was a boiler plate clause commonly appearing in similar instruments.
Coincidentally, almost immediately after Morgan purchased the debentures, Archer announced that it would redeem the debentures effective in August nineteen eighty three.
Archer proposed to redeem the debentures using funds raised by two recent common stock offerings. At around the same time as the stock offerings, Archer also raised substantial funds through public borrowing at interest rates of less than sixteen point o eight percent.
Morgan sued Archer in federal district court, alleging, among other things, that the debenture's terms barred the proposed redemption plan.
Morgan argued that Archer was indirectly funding the redemption through the proceeds of borrowing at an impermissibly low interest rate in violation of the debenture's terms. Morgan asserted that the provision barred redemption at the same time that Archer was engaged in borrowing at a rate lower than the prescribed interest rate regardless of the actual source of the funds used.
Morgan sought a preliminary injunction in joining the planned redemption.
The district court denied Morgan's motion for preliminary injunction.
Both parties cross moved for summary judgment. The court ruled on the motions.
Want more details on this case? Get the rule of law, issues, holding and reasonings, and more case facts here: [insert link of case brief on Quimbee]
The Quimbee App features over 42,700 case briefs keyed to 988 casebooks. Try it free for 7 days! ► quimbee.com/case-briefs-overview
Have Questions about this Case? Submit your questions and get answers from a real attorney here: [insert the link of the case brief on Quimbee]
Did we just become best friends? Stay connected to Quimbee here:
Subscribe to our YouTube Channel ► youtube.com/subscription_center?add_user=QuimbeeDotCom
Quimbee Case Brief App ► quimbee.com/case-briefs-overview
Facebook ► facebook.com/quimbeedotcom
Twitter ► twitter.com/quimbeedotcom
#casebriefs #lawcases #casesummaries
Get more case briefs explained with Quimbee. Quimbee has over 42,700 case briefs (and counting) keyed to 988 casebooks ► quimbee.com/case-briefs-overview
[Here is where the case name and citation will go]
A debenture is a long term unsecured bond or promissory note generally issued by a corporation backed by the issuer's creditworthiness instead of collateral.
Debentures often have a clause restricting the issuer's ability to redeem them before they mature.
In Morgan Stanley versus Archer Daniels Midland, the court interpreted one such clause. In nineteen eighty one, Archer Daniels Midland issued more than one hundred million dollars in debentures set to mature in two thousand eleven.
In nineteen eighty three, Morgan Stanley purchased approximately sixteen million dollars of these debentures.
At that time, the debentures were trading for more than their redemption price. The debentures contained a clause prohibiting Archer from redeeming them, them, quote, from the proceeds or in anticipation of the issuance of any indebtedness, unquote, if the interest rate for such debt was lower than sixteen point o eight percent a year. The prospectus and indenture under which the debentures were issued contained the same language, which was a boiler plate clause commonly appearing in similar instruments.
Coincidentally, almost immediately after Morgan purchased the debentures, Archer announced that it would redeem the debentures effective in August nineteen eighty three.
Archer proposed to redeem the debentures using funds raised by two recent common stock offerings. At around the same time as the stock offerings, Archer also raised substantial funds through public borrowing at interest rates of less than sixteen point o eight percent.
Morgan sued Archer in federal district court, alleging, among other things, that the debenture's terms barred the proposed redemption plan.
Morgan argued that Archer was indirectly funding the redemption through the proceeds of borrowing at an impermissibly low interest rate in violation of the debenture's terms. Morgan asserted that the provision barred redemption at the same time that Archer was engaged in borrowing at a rate lower than the prescribed interest rate regardless of the actual source of the funds used.
Morgan sought a preliminary injunction in joining the planned redemption.
The district court denied Morgan's motion for preliminary injunction.
Both parties cross moved for summary judgment. The court ruled on the motions.
Want more details on this case? Get the rule of law, issues, holding and reasonings, and more case facts here: [insert link of case brief on Quimbee]
The Quimbee App features over 42,700 case briefs keyed to 988 casebooks. Try it free for 7 days! ► quimbee.com/case-briefs-overview
Have Questions about this Case? Submit your questions and get answers from a real attorney here: [insert the link of the case brief on Quimbee]
Did we just become best friends? Stay connected to Quimbee here:
Subscribe to our YouTube Channel ► youtube.com/subscription_center?add_user=QuimbeeDotCom
Quimbee Case Brief App ► quimbee.com/case-briefs-overview
Facebook ► facebook.com/quimbeedotcom
Twitter ► twitter.com/quimbeedotcom
#casebriefs #lawcases #casesummaries
