Talks between Morgan Stanley and Mitsubishi UFJ Financial Group are expected to continue late into Sunday night. The Japanese bank had promised to inject $9 billion in exchange for a 21 per cent of Morgan Stanley. Those basic terms remain largely in place, although the structure of the investment is changing to give MUFG a better dividend and lower conversion price. Both sides have sought reassurances that the Treasury Department will not swoop in and wipe out equity investors
Here’s a basic rundown of the latest reports.
- The Treasury is not currently expected to make a direct investment along side MUFG. It is expected to make suportive noises and provide reassurances that a future government capital injection won’t wipe out MUFG’s investment.
- Under the terms of the deal being worked out tonight, all of the investment from MUFG would be in preferred shares. Originally, one-third of the deal was for common shares. The preferred would have a 10 per cent annual dividend, the New York Times reports.
- The conversion price of the preferred shares bought by MUFG is being renegotiated.The Wall Street Journal reports that it could come down to the low $20s from $31.
- George Soros has an op-ed in the Financial Times that Morgan Stanley needs to be rescued by the U.S. government.
The Federal Reserve and the Treasury fear that an additional $9 billion investment may not be enough to keep Morgan Stanley afloat, according to a person with knowledge of the matter. Indeed, the Treasury drew up plans to recapitalize Morgan Stanley late last week. But it appears as if Morgan Stanley and MUFG have prevailed upon the Treasury to hold off on further investments.
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