Morgan Stanley plans CMS curve-linked accrual notes

By E. Janene Geiss

Philadelphia, May 19 - Morgan Stanley plans to price leveraged callable Constant Maturity Swap (CMS) curve-linked accrual notes due June 9, 2023, according to an FWP filing with the Securities and Exchange Commission.

Interest will be payable quarterly.

For the first two years, the notes will bear interest at 12.5% to 15% per year. The exact coupon will be set at pricing.

Beginning on June 9, 2010, the interest rate for each quarter will be 50 times the proportion of days during the quarter on which the spread of the 30-year CMS rate over the two-year CMS rate is at least the strike level. The strike level will be between 0.08% and 0.12%, with the actual strike to be set at pricing.

Morgan Stanley will be able to call the notes at par on any interest payment date beginning on June 9, 2010.

If the notes are not called early, the payout at maturity will be par.

The notes are expected to price in May and settle June 9.

Morgan Stanley & Co. Inc. is the agent.

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