Wednesday, July 30, 2008

Merrill Lynch

Bloomberg: Merrill to Sell $8.5 Billion of Stock, Unload CDOs
In yesterday's statement, Merrill said it agreed to sell $30.6 billion of collateralized debt obligations -- the mortgage- related bonds that have caused most of the firm's losses -- for $6.7 billion. The buyer is an affiliate of Lone Star Funds, a Dallas-based investment manager.

``Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizeable sale on an accelerated basis, we have decided to further enhance our capital position,'' Thain, 53, said in the statement.

`Little Disheartening'

Merrill will provide financing for about 75 percent of the purchase price, according to the statement. The financing is secured only by the assets being sold, meaning Merrill would absorb any losses on the CDOs beyond $1.68 billion.
In other words: ML gets a USD 1.68 billion cash infusion (hopefully), but otherwise keeps the remaining risk on the USD 5 billion CDO crap without having any upside potential. If it wasn't so obvious anyway (selling Bloomberg stake and on and on), this looks pretty desperate.

WEISSGARNIX has more comments (in German) on the shareholder dilution etc.

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