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Tue, Oct 14, 2008 - Page 10 News List

Mitsubishi, Morgan renegotiate deal

PREFERRED SHARES Morgan Stanley is one of Wall Street’s remaining major banks that have not been sold or filed for bankruptcy, but its financial situation is shakey


Morgan Stanley says Mitsubishi UFJ Financial Group has completed its US$9 billion investment in the firm, giving it a much-needed capital infusion.

The closing comes a day earlier than expected.

As part of the revised deal, Mitsubishi will receive US$7.8 billion in convertible preferred stock that carries a 10 percent dividend and is convertible at a price of US$25.25 per share. The Japanese bank will also receive US$1.2 billion in non-convertible preferred stock, which also carries a 10 percent dividend.

The deal was revised after Morgan Stanley lost nearly 60 percent of its value last week amid speculation the deal would not close.

Shares of Morgan Stanley rose 25.2 percent to US$12.12 in premarket trading.

Negotiations between the two banks amid the current global market turmoil were seen as crucial by financial markets for the future of Morgan Stanley, and both the US Treasury Department and the Japanese government are involved in the talks, the New York Times said.

“The completion of a deal might help calm markets worldwide, which sank last week because of escalating concerns about the fate of financial institutions like Morgan Stanley,” said the Times which talked to people involved in the talks.

“Investors might read the investment as a sign of confidence in the bank’s future,” it said.

Along with Goldman Sachs, Morgan Stanley is one of Wall Street’s remaining major banks that have not been sold or filed for bankruptcy. Its financial situation, however, is precarious and, like Goldman Sachs, it recently gave up its investment business to qualify for US Federal Reserve financial backing as a commercial bank.

Mitsubishi UFJ Financial Group announced late last month it would buy nearly a quarter of Morgan Stanley for US$9 billion.

The agreement was to have been finalized today, but the Times said Mitsubishi is now trying to get more favorable conditions since Morgan Stanley has lost nearly half its market value during last week’s stock market plunge, and was worth, at Friday New York Stock Market close, about US$10.74 billion.

The daily said the two banks had been negotiating over the weekend and hoped to close a deal before the markets opened yesterday morning.

The Times said that, under the proposed new terms being discussed, Mitsubishi would still buy roughly 21 percent of Morgan Stanley, but all of the investment would be through preferred shares, with a 10 percent annual dividend.

Mitsubishi and the Japanese government, it added, have sought assurances from the US Treasury Department that if the US were to decide to inject money into Morgan Stanley at a later time, that such a move would not wipe out preferred shareholders.

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