Morgan Stanley Appears a Little Too Desperate for Cash

Includes: MS, MTU
by: Reggie Middleton

There appears to be additional problems for the street's riskiest bank. I received this from a reader:

I have money tied up (frozen) in the primary fund.  I have been checking the daily position of the fund each day to make sure the investments in that fund are maturing and are turning back to cash.  Up and until today, every maturing investment was paid off.  However, a 1.3 billion repurchase agreement owed to the fund by Morgan Stanley (NYSE:MS) was not paid back, it was rolled over to 10-8 from 10-3 and the coupon rate went to 5.5 from 1.45.  Any thoughts?

By the way, the reserve primary fund website to check these facts is

See the holdings statement which refer to this occurance here. The Reserve Fund's latest notice can be found on the site as well. Morgan Stanley's share price was severely punished Tuesday when the rumor spread that its Japanese funding source may pull out. Although the government gave the okay, over 25% will be bought by Mitsubushi bank over 25% underwater.  I find it hard to believe that the Asians are not tire of losing money in Wall Street investments. Think about it, would you be willing to invest at $25 per share with a market price of  $17 and change, a short ban about to be lifted, and a stock whose volatility and cost of capital is going through the roof. We can only assume they haven't spoke to the other Asian investors whose investment is deep sea diving right now. I welcome any and all comments from those that may have insight into the Morgan Stanley situation. 

Bloomberg: Morgan Stanley, Mitsubishi UFJ Say Deal Going Ahead (Update2) Oct. 7

The Fed and other "key global regulators'' have approved the agreement by Japan's largest bank last week to buy $3 billion of Morgan Stanley's common stock at $25.25 apiece and $6 billion of convertible preferred stock, Morgan Stanley said in a statement. The shares have closed below $25.25 every day since the agreement was reached.

"There's a rumor Mitsubishi may pull out,'' Fred Froewiss, vice president of institutional sales at RF Lafferty & Co. in New York, said earlier today. "Maybe they're getting cold feet because of the freeze in the credit markets. The market is really trading on whispers and fear.''

Morgan Stanley dropped $5.85, or 25 percent, to $17.65 in New York Stock Exchange composite trading after falling as low as $14.13 earlier in the day.