Morgan Stanley shares soar as MUFG deal closes
Morgan Stanley stock nearly doubled after Japan's Mitsubishi UFJ Financial Group (MUFG) completed its $9 billion (5.17 billion pound) investment in the bank on Monday.
U.S. Congress roiled by Air Force tanker decisionU.S. government support helped Morgan nail down a critical deal that many investors had feared could fall apart.
Morgan Stanley shares soared as much as 97 percent after Japan's largest bank bought a 21 percent stake one day earlier than expected. Last week, the New York bank's stock plunged by more than half amid fears that Morgan, forced to wait five days before completing the deal, might not survive the crisis.
"It's different terms, but it's done, and I think people should breathe a sigh of relief that it's done," said Peter Boockvar, equity strategist at Miller Tabak in New York.
Merrill Lynch analyst Guy Moszkowski raised his rating on Morgan Stanley to "buy," citing the capital infusion and saying the shares were "cheap" at 50 percent of book value.
But Fitch Ratings on Monday cut its long-term issuer default rating on Morgan Stanley by two notches to "A," or sixth-highest investment grade. It also downgraded the long-term senior debt to "A" and the subordinated debt to "A-minus," or seventh-highest investment grade.
Fitch said it expects the current stresses on the bank's core business to continue for some time.
Amending the terms of a September 29 agreement, Mitsubishi bought only preferred stock in Morgan Stanley, in contrast with the initial deal under which it had agreed to buy $3 billion of common stock at $31.25 a share - Morgan's book value.
About $7.8 billion of MUFG's investment was in preferred shares with a conversion price of $25.25 a common share and with no maturity date. The other $1.2 billion is in preferred stock that is not convertible and also has no maturity date.
Both preferred series pay a 10 percent interest rate, unchanged from the original pact.
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