- MorganStanley MRS Creditors can file a suit for dividends paid before grocery chain Tops Friendly Markets files for Chapter 11.
- Creditors filed the claims in 2020 against Morgan Stanley Investment Management and other former owners of Tops, alleging that the private equity owners paid themselves $375 million in dividends while Tops remained bankrupt and unable were unable to meet his debt and pension obligations, according to The Wall Street Journal reported.
- The lawsuit alleged that the private equity owners made four separate dividend payments worth hundreds of millions of dollars to themselves while aware that the company’s pension plans were severely underfunded.
- Bankruptcy judge Robert Drain said the trustee made a plausible argument to support the case despite objections from private equity owners.
- He highlighted how the bankruptcy law allows private equity owners to “loot privately held companies to the detriment of their non-insider creditors with virtual impunity.”
- Morgan Stanley has argued that if the dividends had resulted in Tops’ bankruptcy, the company would not have operated for as many years after paying dividends between 2009 and 2013.
- “Tops and Morgan Stanley were aware of the dire state of the United Food and Commercial Workers’ pension plan and that it would become insolvent,” the judge said.
- Price promotion: MS shares traded 3.54% lower at $76.50 premarket on the latest check Friday.
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