Morgan Stanley gets $9 billion from Mitsubishi; Reliant financing includes $350 million in preferreds

By Kenneth Lim

Boston, Sept. 28 - Morgan Stanley dominated the PIPEs headlines on Monday with the release of terms on its $9 billion placement of common and perpetual convertible preferred stock to Mitsubishi UFJ Financial Group, Inc.

Reliant Energy Inc. plans to raise $1 billion of debt and convertible preferred stock in an attempt to end its credit-enhanced retail structure with Merrill Lynch.

Repros Therapeutics Inc. said it is raising $15.6 million through a share placement that will give its largest shareholder a bigger role in the company.

Morgan Stanley raises $9 billion

As previously announced, Morgan Stanley arranged a $9 billion private placement of its common and perpetual preferred stock with Mitsubishi UFJ.

According to terms release Monday, Mitsubishi will acquire 117 million common shares at $25.25 per share for $2.95 billion and 10% convertible perpetual preferred stock for $6.04 billion.

Morgan Stanley common stock (NYSE: MS) fell 15.19% or $3.76 to close at $20.99 in trading Monday amid an overall plunge in share prices.

The preferreds are convertible into Morgan Stanley common shares at an initial conversion price of $31.25 per share.

After one year, if the price of Morgan Stanley's common stock exceeds 150% of the conversion price for 20 or more out of 30 trading days, 50% of the preferred stock will be converted to common stock.

After two years, the remainder of the preferred stock will be converted to common stock under the same conditions.

The proceeds will be used to boost Morgan Stanley's capital and liquidity positions, and provide Morgan Stanley with additional capital to pursue strategic investment opportunities.

New York's Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides its products and services to a group of clients and customers, including corporations, governments, financial institutions and individuals.

"We are delighted to enter into this significant relationship with Morgan Stanley, a firm which has a long standing tradition of providing world-class financial services to a diversified clientele, including governments, corporations and individuals," Mitsubishi UFJ president and chief executive Nobuo Kuroyanagi said in a statement.

"Our two companies share common values of serving the best interests of our clients. I am confident that this powerful alliance will dramatically strengthen our capabilities to provide diverse and high quality financial services."

Morgan Stanley chairman and chief executive John J. Mack also stated: "We are honored to be joining forces with MUFG, a global leader in financial services with $1.8 trillion in assets. MUFG has deep commercial banking expertise, a strong global platform and a talented management team.

"This strategic alliance offers a powerful opportunity to accelerate Morgan Stanley's transition as a bank holding company. Indeed, since beginning to work together, we have become even more enthusiastic about the opportunities our two companies have to collaborate around the world. MUFG's investment is also a strong endorsement of Morgan Stanley's world-class global franchise and future potential. I am confident this strategic alliance will help Morgan Stanley build on its unique market position to realize the many opportunities we see to further enhance our business in the rapidly changing financial marketplace."

Reliant plans $1 billion raise

Reliant Energy arranged to raise $1 billion in loans and convertible preferred stock as it announced plans to end a credit deal with Merrill Lynch and guided for a weaker 2008.

Reliant plans to take a $650 million term loan from GS Loan Partners and initially issue $350 million of 14% convertible preferred stock to First Reserve Corp.

The loan matures in November 2012. It has an initial interest at Libor plus 4.5% with a floor of Libor plus 3.75%.

The 350,000 preferreds will be sold at $1,000 apiece. They are initially convertible at the lesser of $11 and lowest 20-day volume weighted average price of the company's common stock during the six months after closing, with a floor of $8.00.

Each of the deals is contingent upon certain conditions, including reaching definitive agreements with Merrill Lynch regarding termination of the credit-enhanced retail structure. The credit-enhanced retail structure, entered into in 2006, involved Merrill Lynch guaranteeing the supply purchases and related transactions of Reliant's retail business, freeing Reliant from posting collateral for its retail supply purchases.

Reliant Energy, based in Houston, provides electricity and energy services to retail and wholesale customers in the United States.

Reliant on Monday also cut its 2008 profit forecast, citing the impact of Hurrican Ike and lower commodity prices.

"Our retail results in 2008 have been disappointing, due in part to the recent impact of Hurricane Ike," Reliant president and chief executive Mark Jacobs said in a statement. "We have also faced unprecedented turmoil in the financial markets. To address these challenges, we have determined that terminating our credit-enhanced retail structure in an orderly manner is appropriate."

"We have arranged for $1 billion of additional capital," he stated. "Combined with current liquidity of $1.2 billion, we will have adequate liquidity to facilitate the termination of the credit-enhanced retail structure. Certainly, conditions for raising additional capital are not favorable, however, on balance we believe these steps are in our best long-term interests."

Repros raises $15.6 million

Repros Therapeutics said it is placing $15.6 million of its common stock to two investors.

The company is selling 2.4 million common shares at $6.50 apiece. Repros common stock (Nasdaq: RPRX) closed at $6.62 on Monday, up by 8.88% or $0.54.

Efficacy Capital, the company's largest stockholder, is purchasing about 1.85 million shares, while an existing institutional stockholder is buying 550,000 shares. John C. Reed, a new nominee of Efficacy to Repros's board of directors, is buying 3,846 shares.

Efficacy and the institutional investors will also receive purchase options due Sept, 29, 2009 - Efficacy's will let it buy up to an additional $7.5 million of shares and the other institutional investor may buy up to $2.5 million more at the greater of the fair market value of the company's shares at the time of exercise or $7.80 per share.

The purchase option becomes exercisable when Repros has less than $10 million in cash and cash equivalents.

Proceeds will be used to fund the company's research and development activities and for working capital and general corporate purposes.

Repros is a pharmaceutical products company based in The Woodlands, Texas.

As part of the deal, Efficacy Capital will be allowed to own up to 40% of Repros's outstanding common stock and to designate two directors to the board of Repros. Efficacy has nominated its managing partner, Mark Lappe, and Reed, the president and chief executive of Burnham Institute for Medical Research.

"The board of directors and I are pleased that Efficacy Capital and one of our existing institutional shareholders increased their substantial ownership and that Mark Lappe has decided to join our board," Repros president and chief executive Joe Podolski said in a statement. "We welcome Dr. John Reed as well, and believe that these additions to our board will help us to advance our lead Proellex program and also our ongoing development efforts with Androxal."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.