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Morgan Stanley announced Tuesday it had priced a public offering of common equity of 2.2 billion U.S. dollars. The proceeds are intended to fully redeem the preferred capital of the Troubled Asset Relief Program (TARP) before the end of June.
The TARP is a program of the United States government to purchase assets and equity from financial institutions in order to strengthen its financial sector. It is the largest component of the U.S. government's measures in 2008 to address the subprime mortgage crisis.
Morgan Stanley notified the CIC of the offering in light of its healthy business relationship with CIC and the preemptive rights CIC holds. CIC plans to participate in this offering, according toa notice on its Web site.
CIC was optimistic in Morgan Stanley's future development as "Morgan Stanley is widely expected to be able to leverage on its strengthened financial position and will be on the road of resuming its successful trajectory amid the dramatic restructuring of the international financial services industry".
On December 19, 2007, CIC purchased 5.6 billion U.S. dollars mandatory convertible securities into Morgan Stanley common stock, representing approximately 9.86 percent equity ownership in Morgan Stanley.
However, after Mitsubishi UFJ Financial Group, Inc.'s investment in Morgan Stanley in October 2008, CIC's equity ownership was diluted to approximately 7.68 percent.
This new purchase would bring CIC's equity ownership in Morgan Stanley back to approximately 9.86 percent, effectively reducing CIC's overall cost basis and increasing the returns potential, said CIC.
According to a statement posted on Morgan Stanley Web site Tuesday, it has priced a public offering of approximately 80.2 million shares of common stock to the public at 27.44 dollars per share.
CIC has agreed to purchase 44.7 million shares of common stock at the public offering price while the Mitsubishi UFJ Financial Group, Inc. has agreed to buy 16 million shares, the Morgan Stanley statement said.