Morgan Stanley plans convertible accrual notes on CMS curve, S&P 500

By Jennifer Chiou

New York, Jan. 25 - Morgan Stanley plans to price leveraged CMS curve and S&P 500 index-linked accrual notes due Feb. 14, 2031 with issuer fixed-rate conversion right, according to an FWP with the Securities and Exchange Commission.

The interest rate is fixed at 10% for the first four years. Beginning Feb. 14, 2015, the interest rate will be (a) five times the spread of the 30-year Constant Maturity Swap rate over the two-year CMS rate, subject to a floor of zero and a cap of 12% per year in each interest period, multiplied by (b) the proportion of days on which the S&P 500 closes at or above 990. Interest is payable quarterly.

The issuer can choose to exercise its conversion right on any interest payment date during the floating interest period, in which case the interest rate will be converted to a fixed rate of 10% for each subsequent interest payment date.

The payout at maturity will be par.

The notes (Cusip: 61745E3D1) will settle on Feb. 14.

Morgan Stanley & Co. Inc. is the agent.

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