(Updates with past uridashi sales in the fourth paragraph.)
Oct. 4 (Bloomberg) -- Morgan Stanley said it may raise as much as 385 billion yen ($5 billion) by selling uridashi bonds to Japanese investors sometime in the next two years.
The New York-based firm can sell bonds anytime between Oct. 12 this year and Oct. 11, 2013, according to a shelf registration filed to Japan’s Finance Ministry today. Uridashi bonds are debt issued outside of Japan for sale mainly to Japanese retail investors.
The U.S. bank is turning to Japanese individuals for funding at a time when its share price is falling and the cost of insuring its bonds is surging amid concern that Europe’s debt crisis will infect the global banking system. Market volatility prompted Mitsubishi UFJ Financial Group Inc., the biggest shareholder, to issue a statement yesterday saying it is “firmly committed” to their alliance.
Morgan Stanley, owner of the world’s biggest retail brokerage, sold uridashi bonds in Japan at least twice in the past three months, raising 46.5 billion yen in August and 51.5 billion yen in September as part of a 200 billion yen program announced in April. Natsuo Nishio, a Tokyo-based spokesman, declined to comment on the timing for any additional sale.
Sales of yen-denominated uridashi bonds declined 25 percent to 120.9 billion yen in August from a year ago, according to data compiled by Bloomberg.
Relies on Debt
Shares of Morgan Stanley have fallen 54 percent this year amid speculation that Europe’s debt crisis will erode trading income and damage balance sheets of U.S. banks. Morgan Stanley relies on debt markets for funding because it has relatively low deposits. The bank got less than 10 percent of its funding from depositors as of June 30, compared with JPMorgan Chase & Co., which got more than half from retail deposits, SEC filings show.
Mitsubishi UFJ invested $9 billion in Morgan Stanley in October 2008 as the U.S. firm’s stock price collapsed after the bankruptcy of Lehman Brothers Holdings Inc. The banks agreed in April to convert $7.8 billion of preferred shares into common stock and completed the conversion in June, making the Japanese lender Morgan Stanley’s largest common shareholder with a 22.4 percent stake.
Tokyo-based Mitsubishi UFJ asserted its support for Morgan Stanley yesterday as the cost to protect the U.S. firm’s debt surged to the highest level since the weeks after Lehman collapsed. Contracts on Morgan Stanley, the owner of the world’s largest retail brokerage, soared 92 basis points to a mid-price of 583 basis points yesterday in New York, the highest since October 2008, according to London-based data provider CMA.
The largest Wall Street firms will start reporting third- quarter results this month showing how they performed in a market grappling with fallout from Standard & Poor’s downgrade of the U.S. credit rating and concern Greece would default. JPMorgan and Morgan Stanley warned investors in September trading revenue may suffer.
--With assistance from Taku Kato and Yusuke Miyazawa in Tokyo. Editors: Russell Ward, Linus Chua
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