Japanese bank may alter deal

Morgan Stanley is in talks with Mitsubishi UFJ Financial Group Inc. about altering the terms of the Japanese bank’s pending $9-billion infusion into the Wall Street firm after its stock sank 60% last week, said a person familiar with the matter.

Mitsubishi, Japan’s biggest lender, agreed Sept. 29 to pay $6 billion for Morgan Stanley convertible preferred shares and $3 billion for common stock at $25.25 apiece. Now the companies are discussing eliminating the common stock portion and using preferred stock instead, said the person, who declined to be named because the talks are private and the terms may change.

Morgan Stanley is considering a reduction in the conversion price of the preferred shares from $31.25 each to something in the range of $20 to $25, the person said. The U.S. firm expects to pay a 10% dividend, as previously negotiated. Spokespeople for both firms didn’t reply to calls seeking comment.

Morgan Stanley Chief Executive John Mack sought to regain investor confidence last month by converting the firm into a bank holding company and striking the original deal with Mitsubishi UFJ. The steps failed to mollify shareholders shaken by the Sept. 15 bankruptcy of Lehman Bros. Holdings Inc.

Morgan Stanley shares closed at $9.68 on Friday, 62% below the price Mitsubishi UFJ had agreed to pay for the company’s common stock.

“I would be angry if I were a Mitsubishi shareholder and got the same amount of Morgan Stanley when the stock has been cut in value,” said Kenneth Crawford, a senior portfolio manager at Argent Capital Management in St. Louis.