July 29, 2008
Write-Down Is Planned at Merrill
By LOUISE STORY
NY Times

Only 10 days after stunning Wall Street with a huge quarterly loss,
Merrill Lynch unexpectedly disclosed another multibillion-dollar
write-down on Monday and sought to bolster its finances once again by
selling new stock to the public and to an investment company controlled
by Singapore.

Moving to purge itself of the tricky mortgage-linked investments that
have brought the once-proud firm to its knees, Merrill said that it had
sold almost all of the troublesome investments, once valued at nearly
$31 billion, at a fire-sale price of 22 cents on the dollar.

As a result, Merrill expects to record a write-down of $5.7 billion for
the third quarter. Such an outcome could push Merrill into the red for a
fifth consecutive quarter if revenue remains weak and would bring its
charges since the credit crisis erupted last summer to more than $45
billion.

The problems at Merrill, the nation’s largest brokerage, underscore how
bankers and policy makers are struggling to contain the damage to the
financial system and the broader economy caused by the collapse of
housing-related debt. The latest news came on a day when the
International Monetary Fund said there was no end in sight to the
housing slump, a forecast that depressed financial shares as well as the
broader market.

To shore up its finances, Merrill said it would raise $8.5 billion in
new capital from common shareholders, including $3.4 billion from the
investment arm of the Singapore government, Temasek Holdings, which,
with an 8.85 percent stake as of June 30, is already Merrill’s largest
shareholder. Those shares and a conversion of preferred securities into
common stock will dilute the value of stock held by current shareholders
by about 40 percent.