US banking giant Morgan Stanley was racing to salvage a crucial investment from a big Japanese bank in an effort to allay growing fears about its future negotiations so critical to the financial markets that they have drawn in both the US Treasury Department and the Japanese government, a media report said on Monday.
Morgan Stanley was locked in talks on Sunday to renegotiate its planned US$ 9 billion investment from the Mitsubishi UFJ Financial Group of Japan, the New York Times reported citing people involved in the talks.
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, the paper said, adding that investors might read the investment as a sign of confidence in the bank's future.
Mitsubishi, the report said, was pressing for more favourable terms after Morgan Stanley lost nearly half its market value during last week's stock market plunge.
Treasury, however, is not planning to have the United States government take a direct stake in Morgan Stanley as part of a broader effort to stabilise the financial industry and the markets, these people said were quoted as saying.
Morgan Stanley is in the midst of the gravest crisis in its 74-year history, even though analysts estimate that the bank has more than US$ 100 billion in capital. Morgan Stanley's shares price has plunged nearly 82 per cent this year, closing at US$ 9.68 on Friday.
Last month, Mitsubishi agreed buy about 21 per cent of Morgan Stanley. The investment was to be made in the form of US$ 3 billion in common stock, at US$ 25.35 a share, as well as US$ 6 billion in convertible preferred stock with a 10 per cent dividend and a conversion price of US$ 31.25 a share.