Wells and M Stanley raise new capital

Wells and M Stanley raise new capital
Copyright The Financial Times Limited 2009
Published: May 8 2009 16:18 | Last updated: May 8 2009 16:18
http://www.ft.com/cms/s/0/963b0ad2-3be0-11de-acbc-00144feabdc0.html


Wells Fargo and Morgan Stanley on Friday announced they raised $7.5bn and $8.0bn, respectively, the day after the US government’s stress test showed they faced capital shortfalls.

Wells Fargo, which faces a $13.7bn capital shortfall, priced a $7.5bn offering of 341m shares at $22 per share. The bank on Thursday had said it would be selling a lower $6bn in common stock.

Morgan Stanley sold approximately $4bn in equity and $4bn in non-government backed debt in an effort to plug its $1.8bn capital shortfall and repay the $10bn in federal Tarp aid it received last year. The bank had announced $3.5bn of the equity sale in the morning, at a 12 per cent discount to its trading price, and later said it had exercised its over-allotment option, raising about another $500m.

“The significant demand for our equity and debt offerings is a testament to the power of the Morgan Stanley franchise,” said chief executive John Mack.

The $8bn sale comes the day after the bank announced plans to raise $5bn in equity and debt sales. The equity sale consists of an issuance of 146m of common stock at $24 per share.

The bank’s decision to raise $4bn in debt without the insurance of the Federal Deposit Insurance Corporation is significant because the government set the issuance of non-FDIC-backed debt as a condition for financial groups that want to repay funds received under the Troubled Assets Relief Programme. Morgan has now joined its arch-rival Goldman Sachs in issuing non-FDIC insured debt.

John Mack, Morgan Stanley’s chief executive, has said the bank would like to repay Tarp funds as soon as possible.