Morgan Stanley agreed to convert most of Mitsubishi UFJ Financial Group Inc.'s preferred stock in the company, paying a premium of about $2 billion to eliminate annual dividend payments of $784 million.
Mitsubishi UFJ will exchange the $7.8 billion of convertible preferred stock, which had a 10 percent dividend, for 385 million shares of Morgan Stanley common stock, the banks said in a statement Thursday. The move increases Morgan Stanley's Tier 1 common ratio by about 2.7 percentage points to 14.5 percent, according to the statement.
Without a deal, Morgan Stanley could have only forced a conversion if its share price climbed to more than $37.875, 45 percent higher than the April 20 closing price, and traded above that level for 20 out of 30 consecutive trading days.