Terms

Series

Floating Rate Non-Cumulative Preferred Stock, Series A

Liquidation Preference

$25.00

Coupon Rate

4%

Rate Type

Floating

Payment Frequency

Quarterly

Cumulative

No

Perpetual

Yes

Convertible

Yes

Callable

Yes

First Call Date

July 15, 2011

First Call Price

$25.00

Redemption Notice Period

30 days

Capital Stack Ranking

Junior To: All Indebtedness And Non-Equity Claims, Capital Units Cumulative Preferred Stock As To Dividends, Any Future Cumulative Preferred Stock As To Dividends, Any Future Preferred Stock Expressly Stated To Be Senior As To Dividends; Pari Passu With: Other Preferred Stock Ranking Equally As To Dividends And Liquidation (Parity Stock), Capital Units Cumulative Preferred Stock As To Liquidation; Senior To: Common Stock, Any Class Or Series Of Capital Stock Expressly Stated To Be Junior To Series A Preferred Stock

Regulatory (Basel III) Call

Yes

Tax Classification

Qualified Dividend

Qualifies for QDI

Yes

Qualifies for DRD

Yes

Depositary Share Fraction

0.001

Shares Offered

40,000,000

Prospectus Summary

Morgan Stanley's Floating Rate Non-Cumulative Preferred Stock, Series A is offered as 40,000,000 depositary shares, each representing a 1/1,000th interest in an underlying preferred share with a $25,000 liquidation preference (equivalent to $25 per depositary share). The dividend rate resets quarterly at the greater of (1) 3-month USD LIBOR plus 70 bps or (2) 4.00% per annum, payable on January 15, April 15, July 15, and October 15, commencing October 15, 2006. The stock is perpetual with no maturity date and is first callable at par on July 15, 2011. Critically, dividends are non-cumulative: if the Board does not declare a dividend for any quarter, that payment is permanently lost and holders have no claim to recover it. The Series A Preferred Stock is a holding-company-level equity instrument, ranking senior to Morgan Stanley's common stock and any junior-designated capital stock, but subordinate to all indebtedness, non-equity claims, and (as to dividend priority) to the Capital Units Cumulative Preferred Stock and any future cumulative or expressly senior preferred stock. As a holding company issue, it is structurally subordinated to all liabilities of Morgan Stanley's operating subsidiaries. Notably, existing outstanding debt indentures permit Morgan Stanley to defer interest on certain subordinated debt, and during any such deferral period, dividends on Series A Preferred Stock would be blocked. The prospectus also includes a regulatory conversion right: if Morgan Stanley becomes subject to Tier 1 or equivalent capital rules, it may convert the Series A into a new preferred series with modified terms necessary for regulatory compliance, without holder consent. At the 4% floor and $25 per depositary share liquidation preference, the minimum annual income is $1.00 per depositary share ($0.25 quarterly); any LIBOR reset above 3.30% will yield more. Dividends paid to non-corporate U.S. holders qualify for the preferential 15% QDI rate (for taxable years beginning before January 1, 2011), and corporate holders are eligible for the dividends-received deduction. The record date falls on the 15th calendar day before each payment date. The dividend stopper mechanism prevents Morgan Stanley from paying dividends on or repurchasing common or other junior stock in any period where Series A dividends have not been fully paid for the most recently completed dividend period; however, because dividends are non-cumulative, a missed payment imposes no ongoing obligation and the stopper resets each period.

Summarized from the SEC prospectus filing.

Distribution History

Floating Rate Terms

Conversion Terms

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If Morgan Stanley fails to declare and pay full dividends on Series A Preferred Stock for the latest completed dividend period, it cannot pay dividends on or repurchase common stock or other junior securities; conversely, if Morgan Stanley fails to pay dividends on preferred stock ranking senior to Series A (such as Capital Units Cumulative Preferred Stock), it cannot pay dividends on or redeem Series A Preferred Stock until those senior arrears are fully satisfied.

Other Preferreds from Morgan Stanley

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 51 (Average)