The Morgan Stanley Memo Draft

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To: All Employees
From: John Mack
That was really fucking close, people.I am pleased to let you know that we have officially closed today on our $9 billion equity investment from Mitsubishi UFJ Financial Group (MUFG) - a day earlier than expected. This investment further strengthens our capital position and gives us a powerful strategic partner going forward.
[Walid: Is this a disclosure issue if I fail to talk about how we almost blew it trying to bluff our way out of those damned preferred shares? Also, please find out what kind of flowers Nobuo Kuroyanagi likes and send him two dozen.]
Under the terms we were forced to accept of the deal, MUFG is investing $9 billion in exchange for a 21 percent interest in Morgan Stanley, as agreed in September. MUFG is acquiring $7.8 billion of perpetual non-cumulative convertible preferred stock with a 10 percent dividend and a conversion price of $25.25 per share, as well as $1.2 billion of perpetual non-cumulative non-convertible preferred stock with a 10 percent dividend. This investment is a win-win for both companies, and we are honored to welcome MUFG as a long-term investor and strategic partner.
[Walid: I'm ok calling this a "win" for us, right? I mean, I'm allowed to compare against this week, not three weeks ago, right? Also, remind Dave that we have to replace all company cars with Endeavors.]
MUFG and Morgan Stanley are working toward numerous areas of collaboration, including pursuing a lending relationship, and we are confident that the combination of these two world-class institutions creates a powerful global alliance in the current challenging market environment. Indeed, this strategic partnership will bring together Morgan Stanley's global investment banking and asset management expertise with MUFG's vast resources and significant expertise in beertruck and bus manufacturesteelplasticsoilinsurancealuminum retail banking to better serve clients worldwide.
[Walid: Are we sure about this synergy thing?]
I, for one, welcome our new Tokyo overlords. I know many of you can't stand the thought of dealing with more low-brow retail banking and the This alliance also is a key step in Morgan Stanley's downgrade transition under our new bank holding company status. MUFG is the world's second largest commercial bank with $1.1 trillion in assets, and their support and insights will boost our efforts to grow our deposit base and expand our retail business - leveraging the many advantages Morgan Stanley currently has. As you know, we already have two deposit taking institutions with total deposits of $36 billion - and the Firm will be looking to grow those deposits over time. We also have 8,500 financial advisors and almost 500 branches, which the Firm can use to expand the retail banking products and services we offer our clients. We will actually have enough cash to make payroll and We also will be looking at acquisitions that might make sense for the Firm and help us ramp up our deposit base.
Today's investment further bolsters Morgan Stanley's strong capital position - and boosts our Tier 1 Capital Ratio to more than 15.5 percent, on a pro-forma basis as of August 31. This is more than double the 6 percent required by the Federal Reserve to be treated as well-capitalized and is one of the highest Tier 1 Capital Ratios among bank holding company peers. This investment also will reduce Morgan Stanley's leverage ratio to under 20x and its adjusted leverage ratio to just over 10x, on a pro-forma basis at August 31. The fact is that our capital and liquidity positions remain strong, as we made clear in our 10Q filing on Thursday and as numerous financial analysts made clear in their reports last week.
[Walid: "Made clear," is ok here, right? Even if no one at all ever bought it?]
These are truly fucked up unprecedented times, and I know the last few weeks have been difficult for all of you. Tough times like this test people, and the people of Morgan Stanley have risen to the challenge. You have continued to serve our clients and build our business, and I am incredibly proud of how the Firm has responded to these challenging markets. MUFG's investment is a powerful endorsement of the tremendous value in the Morgan Stanley franchise, but the fact that so few of you could find jobs elsewhere in time to caliber and commitment of our people give me even greater confidence about the future of this Firm. Thank you all for your continued hard work, focus and dedication.
Morgan Stanley Memo: 'We Also Will Be Looking at Acquisitions' [The Wall Street Journal - Deal Journal]

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