New York: US banking giant Morgan Stanley on Sunday was trying to salvage a $9 billion deal to sell 21% of its capital to Japan’s Mitsubishi UFJ Financial Group, The New York Times said Sunday.
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 daily 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 ivolved in the talks.
“Investors might read the investment as a sign of confidence in the bank’s future,” it added.
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 in late September it would buy nearly a quarter of Morgan Stanley for $9 billion.
The aggreement was to have been finalized 14 October, but according to The New York Times 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 $10.74 billion.
The daily said the two banks have been negotiating since the start of the weekend and hope to close a deal before the markets open Monday morning.
The Times said that, under the proposed new terms being discussed, Mitsubishi would still buy roughly 21% of Morgan Stanley, but all of the investment would be through preferred shares, with a 10% annual dividend.
Mitsubishi and the Japanese government, it added, have sought assurances from the 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.
US Treasury Secretary Henry Paulson on Friday announced that the US government might use some of the $700 billion bailout package to take direct stakes in banks, but did not spelled out how it would do so.
The Times said that, for the moment, the US Treasury was not considering intervening in Morgan Stanley.
No Treasury Department spokesman was available late Sunday for comment on the report.
Billionaire investor George Soros wrote Sunday in a column in The Financial Times that Morgan Stanley needs to be rescued by the US government.