The Japanese bank still plans to invest $9bn and take a 21 per cent share of Morgan Stanley, but under a changed formula that will see the entire investment in the form of convertible preferred shares at a significantly lower price than previously agreed.
Under the original deal, MUFG would have invested $3bn in 9 per cent of Morgan Stanley's common stock at $25.25 a share, and another $6bn in convertible preferred stock. The convertible stock was to pay an annual dividend of 10 per cent, and convert into common stock at $35.25 in two tranches over the coming two years.
Under the new terms being discussed, the entire $9bn would be in the form of convertible preferred stock, that would eventually convert into common stock at a price that is expected to be between $20 and $25. Both sides have said they expect the deal to close on Tuesday.