Morgan Stanley sitting on loss as deal turns sour
MORGAN Stanley has inadvertently become the biggest shareholder in Danish telecom group TDC after underwriting a deal to sell 15.5 per cent of the company.
The investment bank is now sitting on a paper loss from the deal estimated at £4.5m, although the eventual loss (or gain) will not be clear until it has sold off its 7.2 per cent stake.
That could take a long time, according to some bankers, given that regular daily trading volumes of TDC stock are less than three per cent of the value of Morgan Stanley’s holding, which was worth 2.5bn Danish kroner (£280m) at yesterday’s closing price.
Underwriting an accelerated book build – a share sale on a timescale of a few days – is somewhat riskier than other equity deals, while the 5.6bn Danish kroner value of the TDC deal raised the stakes even further.
Capital markets bankers say that with thousands being laid off and business scarce, dealmakers are pushing to take on riskier deals than they would in the past. One senior capital markets banker said that some are being “insanely aggressive” purely to move up industry league tables. “It is not a pretty sight. The pressure and the league tables are causing people to act in a crazy way… trying to fight for their jobs,” he said.