Mizuho lowers conversion for Merrill shares-Nikkei

NEW YORK (Reuters) - A unit of Mizuho Financial Group (8411.T) decided to change the terms of its Merrill Lynch convertible securities it owns rather than exchanging them for shares, according to Japan's Nikkei Net.

The report clears up the identity of a investor referred to in a press statement on Monday when Merrill Lynch said it was selling about $8.5 billion of shares to replenish capital. The bank raised capital after agreeing to sell $30.6 billion of repackaged debt at a deep discount.

At least part of that share sale also was meant to compensate investors that had bought Merrill shares and convertible securities in December and January.

In those prior capital-raising deals, Merrill agreed to compensate investors if the bank later sold shares at too low a price.

On Monday, Merrill said that shareholders owning $5.4 billion out of an outstanding $6.6 billion in convertible preferred stock had agreed to exchange their securities for about 195 million shares of common stock.

The bank also said one holder of $1.2 billion in convertible preferred shares had agreed to exchange the securities for new convertibles rather than accept shares. Nikkei reported on Friday that the holder was Mizuho Corporate bank, a unit of Mizuho.

Mizuho bought $1.2 billion of the convertible securities in January, when Merrill Lynch was raising capital to offset write-downs as a result of its mortgage holdings.

Those securities were scheduled to be converted into Merrill shares, with the face value of a preferred security buying Merrill shares at $52.40. Mizuho and Merrill agreed to lower that conversion price to $33, and Mizuho will not receive future compensation if Merrill issues shares again.

A Merrill Lynch spokeswoman was not immediately able to comment.

(Reporting by Elinor Comlay; editing by Carol Bishopric)