Morgan Stanley closes Mitsubishi deal; Hana sweetens unit placement; Castle Brands prices offering

By Kenneth Lim

Boston, Oct. 13 - Morgan Stanley closed a $9 billion private placement of preferred stock to Mitsubishi UFJ Financial Group, Inc., after sweetening portions of the deal.

Hana Mining Ltd. also amended the terms of its C$1.5 million placement to sell units at a lower price.

Castle Brands Inc. priced its $15 million offering of convertible preferreds in a deal that will also effect a significant leadership change at the company.

Morgan Stanley closes Mitsubishi deal

Morgan Stanley settled a sweetened $9 billion private placement of 10% perpetual preferred stock with Mitsubishi UFJ.

Under the revised terms, Mitsubishi bought $7.8 billion of 10% non-cumulative convertible preferred stock and $1.2 billion of 10% non-cumulative non-convertible preferred stock. The investor was initially supposed to buy 117 million common shares at $25.25 per share for $2.95 billion and perpetual preferred stock for $6.04 billion.

The initial conversion price of the convertible preferreds is $25.25 per share.

Morgan Stanley common stock (NYSE: MS) surged to $18.10 on Monday, up by 86.98% or $8.42.

New York-based Morgan Stanley is a global financial services firm.

The investment will also give Mitsubishi a seat on Morgan Stanley's board of directors.

The deal raises Morgan Stanley's Tier 1 capital ratio, which was already above 15.5% on a pro-forma basis as of Aug. 31, 2008, and reduces its leverage ratio to just under 20 times.

"We are honored to welcome Mitsubishi UFJ, a global leader in commercial banking, as a long-term investor and strategic partner of Morgan Stanley," said Morgan Stanley chairman and chief executive John J. Mack in a statement.

"We are working toward numerous areas of collaboration, and we are confident that these two world-class institutions will create a powerful global alliance in the current challenging market environment. Today's investment further bolsters our strong capital position and, together with our strategic alliance, will accelerate our transition under our new bank holding company structure and help us realize opportunities created by the continuing dislocation in the financial markets."

Mitsubishi president and chief executive Nobuo Kuroyanagi added: "Despite a very challenging environment, MUFG and Morgan Stanley have demonstrated our mutual commitment to this strategic alliance and have revised the terms of our investment in the best interests of both companies and our shareholders. We are now looking forward to working with Morgan Stanley to deliver the significant strategic benefits that we believe our alliance will bring."

Hana lowers placement price

Hana Mining lowered the per-unit price on its C$1.5 million non-brokered private placement.

The company now plans to sell up to 10 million units at C$0.15 each. It originally was going to sell up to 5 million units at C$0.30 each.

Each unit comprises one share and one half-share warrant. Each whole warrant will be exercisable at C$0.30, lowered from C$0.75, for 18 months.

Hana common stock (TSX: HMG) closed at C$0.20 on Monday, up by 33.33% or C$0.05.

Proceeds will be used for exploration.

Hana is a mineral exploration company based in Vancouver, B.C.

Castle sets deal size

Castle Brands said it will raise $15 million through its previously announced private placement of series A convertible preferred stock.

The deal was guided to fall between $12.5 million and $15.13 million, based on an Oct. 9 announcement by the company.

The company now plans to sell 1.2 million preferreds at $12.50 apiece. It originally intended to sell between 1 million and 1.21 million preferreds.

Each preferred will be initially convertible into 35.7143 common shares at $0.35 per share. Castle Brands common stock (AMEX: ROX) gained 27.83% or $0.05 to close at $0.23 on Monday.

The deal will be conducted with a group of investors led by existing investor Dr. Phillip Frost, I.L.A.R. SpA, the owner of Pallini liqueurs, and Vector Group Ltd.

New York-based Castle Brands markets brands of vodka, rum, whiskey and liqueurs.

Concurrently with the closing of the preferred deal, Castle Brands' outstanding $9 million of 6% convertible notes due March 1, 2010 will be converted into the series A convertible preferreds at a per share price of $23.21. Almost all of its outstanding $10 million of 9% senior secured notes due May 31, 2009 will also be converted into the series A convertible preferreds at a per share price of $12.50.

Four of Castle Brands' nine directors - Keith A. Bellinger, Robert J. Flanagan, Colm Leen and Kevin P. Tighe - also resigned as part of the deal, and they will be replaced with four directors designated by the placement investors.

"This transaction will result in a significant capital infusion and the conversion of virtually all of our debt into equity," Castle Brands chairman Mark Andrews said in a statement. "Together, these developments will put our company on much firmer footing, which will enable us to pursue our original vision of building our own premium brands, supporting our existing agency brands, pursuing new agency relationships and making brand acquisitions."

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