The revised terms are similar to those discussed last night, with the Japanese bank investing the same amount but receiving an increased ownership stake (21%) and receiving more in preferred stock. Note confusion in the Journal article: the news alert, says, “MUFG Closes Morgan Stanley Investment With Revised Terms” when the story itself says both that the deal has closed (first sentence of the extract) and will close tomorrow (last sentence). Reuters similarly indicated in headlines that he announcement was of revised terms (and they were expecting them to be announced by 8:00 AM EDT, yet they were not up as of 8:20 AM), yet the headline now (this section tweaked at of 9:30 AM) uses the word “buys”. BusinessWire says the deal has closed, so one presumes it has, but normally one cannot close a deal within mere hours of revising terms, particularly on a bank holiday in the US and Japan. They would have needed to close in locale where banks were open. Anything is possible, and if nothing else, this shows a keen desire not to have the deal buffeted by another day of stock trading.
From the Wall Street Journal:
Mitsubishi UFJ Financial Group Inc. closed a $9 billion investment in Morgan Stanley that gives the Japanese company a 21% interest.Under revised terms, MUFG has acquired $7.8 billion of convertible preferred stock with a 10% dividend and a conversion price of $25.25 a share, and $1.2 billion of non-convertible preferred stock with a 10% dividend. Previously, MUFG was getting a mix of preferred and common shares.
Morgan and MUFG had worked Sunday to finish the pact, as both sides pushed to keep the general terms of the deal intact and the U.S. government signaled it was prepared to protect the Japanese investment, people familiar with the matter said.
The U.S. government was involved with the talks but isn’t contemplating a direct investment alongside MUFG, one person familiar with the talks said.
This could show the government believes Morgan Stanley is strong enough to survive on its own. Still, to help protect MUFG, the U.S. government was contemplating a structure in which any possible future government investment in Morgan Stanley wouldn’t wipe out MUFG’s investment.
The new wrinkles make the deal more expensive for Morgan Stanley and possibly could fall below some investors’ expectations for a dramatic weekend rescue of the firm. But Morgan Stanley is hoping that finishing the investment on schedule by Tuesday will boost confidence among investors who worried the entire deal could fall through.
Yves Smith 
Posts
MUFG probably wants something in writing that says the pref won’t get diluted when the Paulson puts in the taxpayer money.
Essentially, MUFG wants a putable prefered where the U. S. govt. guarantees the put.
While the Japanese are quite correct in not trusting the word of the Bush Admin, not sure that a written guarantee is worth much either.
Putable prefereds are usually refered to as ‘debt’ rather than equity.