## Facts

- Archer Daniels Midland Company (ADM) issued $125 million of 16% sinking fund debentures due 2011 under an indenture permitting optional redemption on 30–60 days’ notice at specified prices.
- The indenture contained a “refunding” restriction barring redemption “from the proceeds, or in anticipation of the issuance,” of indebtedness with an interest cost below a stated threshold (16.08% before May 15, 1991).
- After issuance, ADM obtained financing at rates below 16% and also raised capital through two common stock offerings.
- Morgan Stanley & Co. acquired more than $16 million of the debentures at a premium over face value.
- ADM announced a planned redemption of the 16% debentures and stated it would fund the redemption with proceeds from the common stock offerings.
- Morgan Stanley alleged the redemption violated the refunding restriction because, in economic substance, ADM’s lower-cost debt indirectly supplied funds enabling the redemption.
- Morgan Stanley sued for preliminary and permanent injunctive relief and damages, asserting contract/indenture claims and federal and state securities claims; the parties conducted expedited discovery and filed cross-motions for summary judgment.

## Issues

1. Whether the indenture’s refunding restriction barred a redemption directly funded with equity proceeds when the issuer also had outstanding, lower-interest debt financing.
2. Whether alleged nondisclosure of a redemption intention and of the issuer’s interpretation of the refunding clause constituted a material omission or deceptive scheme under federal securities laws.
3. Whether the standards for injunctive relief were met, including irreparable harm and likelihood of success on the merits.

## Decision

- The court held the proposed redemption did not violate the indenture because the refunding restriction required a direct connection between the redemption funds and disqualifying low-interest indebtedness, and equity proceeds fell outside the restriction’s scope.
- The court rejected the federal and related state securities theories, finding no sufficient showing of a material misstatement/omission, deceptive conduct, or the requisite intent.
- Injunctive relief was denied because any injury was compensable by money damages and Morgan Stanley failed to show a sufficient likelihood of success or that the equities favored an injunction.
- The court granted ADM summary judgment on key contract issues and denied efforts to block the redemption.

## Legal Principles

- Boilerplate bond indenture provisions are construed to favor uniform, predictable meanings; courts generally apply the plain language of standard redemption/refunding clauses.
- A refunding restriction phrased in terms of redemption “from the proceeds” of disqualifying indebtedness typically requires a direct funding nexus; equity-funded redemptions are permitted absent clear contrary language.
- Securities-fraud claims based on issuer conduct surrounding redemption require proof of material misstatement or omission and, where applicable, intent; disagreement over contract interpretation, without more, does not establish a deceptive scheme.
- Injunctive relief is inappropriate where alleged losses can be calculated and remedied through damages and the movant cannot show a strong likelihood of success on the merits.

## Conclusion

The court enforced the indenture’s refunding restriction according to its plain meaning, allowing ADM to redeem the debentures with equity proceeds despite the issuer’s other lower-interest borrowings, and it denied securities-fraud and injunction claims for lack of a material deceptive omission, sufficient intent, and irreparable harm.


Morgan Stanley & Co. v. Archer Daniels Midland Co., 570 F. Supp. 1529 (S.D.N.Y. 1983)